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MakcuM [25]
3 years ago
15

a pension fund has an average duration of its liabilities equal to 15 years. the fund is looking at 8-year maturity zero-coupon

bonds yield perpetuities to immunize its interest rate risk how much of its portfolio should it allocate to the zero-coupon bonds to immmunize if there are no other assets funding the plan
Business
1 answer:
adoni [48]3 years ago
3 0

Answer:

a = 27.6%

Explanation:

The computation of the allocation of zero coupon bonds is shown below:

But before that we need to determine the following calculations

Duration of perpetuity is

= 1.06 ÷ .0.06

= 17.67 years

Now the equation should be

Let us assume the allocation of zero coupon bond be a

15 years = a × 8 + (1 - a) × 17.67

15 years = 8a + 17.67 - 17.67a

-2.67 = -9.67a

a = 27.6%

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A firm has net working capital of $560, net fixed assets of $2,306, sales of $6,700, and current liabilities of $870. How many d
natita [175]

Answer:

1.79

Explanation:

Net working capital is $560

Net fixed assets is $2,306

Sales is $6,700

Liabilities is $870

Therefore the amount of dollar wort sales generated in every $1 can be calculated as follows

= 560+870

= 1,430

6700/1430+2,306

= 6700/3736

= 1.79×1

= 1.79

4 0
3 years ago
A company has increasing marginal returns. Total production is 5 units when the first worker is hired. Total production rises to
zhuklara [117]

Answer:

Total production should be greater or equals to 20 units.

Explanation:

Increasing marginal returns is an improvement in the quantity of goods produced by a company and it typically occurs over the short period of time when the amount of a variable input is initially added to a fixed input.

so given that total production increases when the first and the second workers were hired, therefore total production should be more than 20 units

5 0
3 years ago
MaltHanks Inc., a leading American firm, starts its operations in China. It incurs a lot of additional costs in comparison to th
asambeis [7]

Answer: Liability of foreignness

Explanation: In simple words, the extra cost incurred by a company operating in a foreign country as compared to the local companies over there is called the liability of foreignness.

In the given case, the American company incurred extra cost in china due to their lack of local knowledge and discrimination from the locals.

Thus, from the above we can conclude that Malt hanks faced liability of foreignness.

5 0
3 years ago
An overgrown lawn is manicured by mowing it with a lawn mower is an example of
Marta_Voda [28]

An overgrown lawn is manicured by mowing it with a lawn mower is an example of physical change. Physical change is a change that affects the physical form of the substance or environment but not its chemical composition. In this example, the lawn is manicured by mowing it, so the physical form would be changed. But, the chemical composition of the lawn was maintained and was not change. So,<span> this is clearly a physical change.</span> 

<span> </span>

4 0
4 years ago
Palmer Corp. is considering the purchase of a new piece of equipment. The cost savings from the equipment would result in an ann
VashaNatasha [74]

Answer:

So, accounting rate of return = 33 %

Explanation:

given data

net income after tax = $179,850

initial cost = $545,000

time = 7 year

salvage value = $34,000

we will get here  the accounting rate of return

solution

as we know that accounting rate of return is express as

accounting rate of return = Net income ÷ initial investment    .................1

put here value and we get

accounting rate of return = \frac{179850}{545000}  

So, accounting rate of return = 33 %

7 0
3 years ago
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