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stich3 [128]
3 years ago
14

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?
Business
1 answer:
gayaneshka [121]3 years ago
7 0

Answer:

The 52 of its portfolio should be allocated to the zero-coupon bonds to immunie if there are no other assets funding the plan.

Explanation:

the duration of the perpetuity = (1+YTM)/YTM

                                                  = (1+0.04)/0.04

                                                  = 26 years

the weights of the bonds = w

5*w + 26*(1-w) = 15

5*w + 26 - 26*w = 15

21*w =  11

w = 0.52

Therefore, The 52 of its portfolio should be allocated to the zero-coupon bonds to immunie if there are no other assets funding the plan.

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Data on total employment can be a good indicator of whether the economy is currently in a recession. This kind of data is called
Harrizon [31]
<h2>Statistics about "Economic activity".</h2>

Explanation:

Economic indicators as stated in the question is right and I am enriching the definition with few other pointers.

  • Analysis of Economic Performance
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  • Help investors
  • Assess about the investment
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                                     b) Employment indicator

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3 0
3 years ago
On December 31, 2016, Yong sells his 10% interest in Catawissa LLC to Mei for $17,500. Yong is a calendar year taxpayer. Catawis
Katyanochek1 [597]

Answer:

$6,500

Explanation:

Capit gain on sales = sales of interest by Yong -basis of Yong in the LLC interest

Sales of interest by Yong $17,500

Less Basis of Yong in the LLC interest $11,000

Gain $6,500

Therefore Yong will tend to recognize a gain of $6,500 because he makes a sale of $17,500 in which his basis in the LLC interest was $11,000 making him to have a capital gain of $6,500

5 0
3 years ago
Siblings are considered "family" under the stock attribution rules that apply to stock redemptions.
harina [27]

Answer:

false

there is no ownership atribution between siblings, cousins, or a mother-in-law and son-in-law

4 0
3 years ago
james​ Lawson's Bed and​ Breakfast, in a small historic Mississippi​ town, must decide how to subdivide​ (remodel) the large old
balu736 [363]

Answer:

The numbers are missing, so I looked for a similar question (see attached image).

  • the expected value for option A (modernize everything) = (0.5 x $90,000) + (0.5 x $25,000) = $57,500
  • the expected value for option B (modernize only second floor) = (0.4 x $80,000) + (0.6 x $70,000) = $74,000
  • the expected value for option C (do nothing) = (0.3 x $60,000) + (0.7 x $33,000) = $41,100

The option with the highest expected value is option B (modernize only second floor).

8 0
4 years ago
Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for cost of good
nikklg [1K]

Answer:

a. 42.0% for 2017 and 32.0% for 2016

Explanation:

Common size % for cost of goods sold = Cost of goods sold/Net sales

<u>For 2017</u>

= $219,400 / $522,200

= 0.4201456

= 42%

<u>For 2016</u>

= $135,440 / $423,400

= 0.31988663

= 31.99%

8 0
3 years ago
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