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Zanzabum
3 years ago
9

My pension plan will pay me $10,000 once a year for a 10-year period. The first payment come in at the end of 6th year from now.

The pension fund wants to immunize its position. If the pension plan uses 5-year zero-coupon bond and 20-year zero coupon bond to construct the immunization position,what is the weight on the 5-year zero-coupon bond? Suppose the interest rate is 10%.
Business
1 answer:
Gala2k [10]3 years ago
6 0

Answer:

0.75163

Explanation:

So, we are given the following data or parameters or information which is going to help us in solving the question above;

=> Payment for the pension = $10,000 once a year for a 10-year period.

=> Time for the first payment = ''end of 6th year from now''.

=> Type of Pension plan for immunization = " 5-year zero-coupon bond and 20-year zero coupon bond to construct the immunization position''

=> Interest rate = 10%.

Therefore, the weight on the 5-year zero-coupon bond can be calculated as follows:

Duration = (Weight × 5) + [( 1 - weight) × 20].

=> 5b + 20 - 20b = 8.7255.

=> b = 0.75163.

Therefore, the weight on the 5-year zero-coupon bond is 0.75163.

The weight on the 20- year zero-coupon bond = 1 - 0.75163= 0.2884.

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Suppose that the salary range for recent college graduates with a bachelor's degree in economics is $30,000 to $50,000, with 25
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Explanation:

The Expected Earning for a college alum with a four year college education in financial matters is determined as weighted normal all things considered, utilizing likelihood of every result as its weight.  

Although the Expected Earning is;  

Expected Earning = (25% × 30,000) + (50% × 40,000) + (25% × 50,000)  

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7 0
3 years ago
The Constitution sets out the authority and the limits of the branches of the government.
kotegsom [21]

Answer:

The correct answer is c. ​each branch has some power to limit the actions of the others.

Explanation:

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3 years ago
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Arte-miy333 [17]

Answer:

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5 0
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