present value of your liability/duration of your liability/
You plan to save for a liability of $10,000 that is coming due in 5 years. The appropriate rate of interest for this liability is 5.00%. You wish to immunize yourself from interest rate risk, and to this end you may invest in 2-year zero-coupon bonds yielding 4.00% and 8-year zero-coupon bonds yielding 7.00%. Both bonds have a face value of $1000. (Use annual compounding. Round all your answers to 2 decimals.)
What is the present value of your liability? $
What is the duration of your liability? years
How many 2-year bonds do you need to purchase?
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You are managing a portfolio of $1 million. Your target duration is 10 years, and you...
You are managing a portfolio of $1 million. Your target duration
is 10 years, and you can invest in two bonds, a zero-coupon bond
with maturity of five years and a perpetuity, each currently
yielding 7.5%.
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 7.5%. a. What weight of each bond will you...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 8.6%. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond b. How will these weights change next year if target duration is now nine years? (Round your answers to 2...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 10.0%. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) b. How will these weights change next year if target duration is now nine years? (Round your answers to 2 decimal places.)
A pension fund has an average duration of its liabilities equal to 13 years. The fund...
A pension fund has an average duration of its liabilities equal
to 13 years. The fund is looking at 4-year maturity zero-coupon
bonds and 5% yield perpetuities to immunize its interest rate risk.
How much of its portfolio should it allocate to the zero-coupon
bonds to immunize if there are no other assets funding the
plan?
Questlon 1 (of 80) 1 A pension fund has an average duration of its liabilities equal to 13 years. The fund is looking at...
A pension fund has an average duration of its liabilities equal to 15 years. The fund...
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? Write in percentages.
A pension fund has an average duration of its liabilities equal to 15 years. The fund...
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? Write in percentages.
value: 30.00 points You are managing a portfolio of $2.7 million. Your target duration is 15...
value: 30.00 points You are managing a portfolio of $2.7 million. Your target duration is 15 years, and you can choose from two bonds a zero-coupon bond with maturity 10 years, and a perpetuity, each currently yielding 5 %. a. How much of each bond will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond 70 b. How will these fractions change next year if target duration is...
You are managing a portfolio of $1.0 million. Your target duration is 23 years, and you...
You are managing a portfolio of $1.0 million. Your target duration is 23 years, and you can choose from two bonds: a zero-coupon bond with maturity five years, and a perpetuity, each currently yielding 2%. a. How much of () the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond b. How will these fractions change next year if target duration...
You are managing a portfolio of $1.0 million. Your target duration is 22 years, and you...
You are managing a portfolio of $1.0 million. Your target duration is 22 years, and you can choose from two bonds: a zero-coupon bond with maturity five years, and a perpetuity, each currently yielding 2%. a. How much of (i) the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond b. How will these fractions change next year if target duration...
You are managing a portfolio of $1.0 million. Your target duration is 16 years, and you...
You are managing a portfolio of $1.0 million. Your target duration is 16 years, and you can choose from two bonds: a zero- coupon bond with maturity five years, and a perpetuity, each currently yielding 5%. a. How much of (1) the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond b. How will these fractions change next year if target...
You are managing a portfolio of $1 million. Your target duration
is 10 years, and you can invest in two bonds, a zero-coupon bond
with maturity of five years and a perpetuity, each currently
yielding 7.5%.
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 7.5%. a. What weight of each bond will you...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 8.6%. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond b. How will these weights change next year if target duration is now nine years? (Round your answers to 2...
A pension fund has an average duration of its liabilities equal
to 13 years. The fund is looking at 4-year maturity zero-coupon
bonds and 5% yield perpetuities to immunize its interest rate risk.
How much of its portfolio should it allocate to the zero-coupon
bonds to immunize if there are no other assets funding the
plan?
Questlon 1 (of 80) 1 A pension fund has an average duration of its liabilities equal to 13 years. The fund is looking at...
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? Write in percentages.
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? Write in percentages.
value: 30.00 points You are managing a portfolio of $2.7 million. Your target duration is 15 years, and you can choose from two bonds a zero-coupon bond with maturity 10 years, and a perpetuity, each currently yielding 5 %. a. How much of each bond will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond 70 b. How will these fractions change next year if target duration is...
You are managing a portfolio of $1.0 million. Your target duration is 23 years, and you can choose from two bonds: a zero-coupon bond with maturity five years, and a perpetuity, each currently yielding 2%. a. How much of () the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond b. How will these fractions change next year if target duration...
You are managing a portfolio of $1.0 million. Your target duration is 22 years, and you can choose from two bonds: a zero-coupon bond with maturity five years, and a perpetuity, each currently yielding 2%. a. How much of (i) the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond b. How will these fractions change next year if target duration...
You are managing a portfolio of $1.0 million. Your target duration is 16 years, and you can choose from two bonds: a zero- coupon bond with maturity five years, and a perpetuity, each currently yielding 5%. a. How much of (1) the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuity bond b. How will these fractions change next year if target...
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