Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. finance
  3. alpha insurance company is obligated to make payme

Alpha Insurance Company is obligated to make payments of $2 million, $3 million, and $4 million...

50.1K

Verified Solution

Question

Finance

Alpha Insurance Company is obligated to make payments of $2million, $3 million, and $4 million at the end of the next threeyears, respectively. The market interest rate is 8% perannum.

i. Determine the duration of the company’s payment obligations.

ii. Suppose the company’s payment obligations are fully funded andimmunized using both 6-month zero coupon bonds and perpetuities.Determine how much of each of these bonds the company will hold inthe portfolio. (7 marks )

Answer & Explanation Solved by verified expert
4.1 Ratings (632 Votes)
SEE THE IMAGE ANY DOUBTSFEEL FREE TO ASK THUMBS    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Transcribed Image Text

Alpha Insurance Company is obligated to make payments of $2million, $3 million, and $4 million at the end of the next threeyears, respectively. The market interest rate is 8% perannum.i. Determine the duration of the company’s payment obligations. ii. Suppose the company’s payment obligations are fully funded andimmunized using both 6-month zero coupon bonds and perpetuities.Determine how much of each of these bonds the company will hold inthe portfolio. (7 marks )

Other questions asked by students

Q

1. Describe the significance of phase 4 in the process of new drug approval. What is...

Biology
Q

11 A thin prism P of refracting angle 3 and refractive index 1 5 is...

Physics
Q

out slippi A cylinder of mass m and radius R is rolling horizontal surface with...

Physics
Q

1 8 points Suppose that Jim hit a golf ball with an initial velocity of...

Basic Math
Q

se the fact that the trigonometric functions are periodic to find the exact value of...

Calculus
Q

Question 37 1 point Solve The population of a particular country was 24 million in...

Algebra
Q

Fitzgerald Corporation has 58,000 shares authorized, 39,000 issued, and 10,000 shares of treasury stock. ________...

Accounting
Q

The year-end financial statements of Cobra Tax Services are provided below. COBRA TAX SERVICES Income...

Accounting
Q

2018 SACRAMENTO INC. Comparative Balance Sheets June 30, 2019 and 2018 2019 Assets Cash $100,800...

Accounting
Q

what amount is the write down on the raw material general ledger account using the...

Accounting
Q

You have just been hired by FAB Corporation, the manufacturer of a revolutionary new garage...

Accounting
Q

The risk-free rate of return is 2.7 percent and the market risk premium is 11.7...

Finance