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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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CONSUMPTION TO THE LEVEL OF DISPOSABLE INCOME

Explanation:

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7 0
3 years ago
Lena and Joe are two of the partners in a business Lena makes $3 in profits for every $4 that Joe makes if Joe makes $60 profit
melomori [17]
Lena makes $45 profit.

Extra information:

The amount of profit Lena makes is 3/4th of the profit Joe makes, seeing as when Joe makes $4 profit, Lena makes $3 and $3 is 3/4th of $4. Therefore, when Joe makes a profit of $60, Lena makes a profit of (60 x 3/4) $45.
7 0
3 years ago
American apparel makers complain to Congress about competition from China. Congress decides to impose either a tariff or a quota
Viefleur [7K]

Answer:

B) quota

Explanation:

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3 years ago
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Answer:

$2,010  

Explanation:

The future value of the savings account in 6 years can be computed using the below future value formula:

FV=PV*(1+r)^n

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r=annual interest rate=5%

n=number of years envisaged=6

FV=$1,500*(1+5%)^6

FV=$1,500*(1.05)^6

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Marat540 [252]

Answer:

The amount of interest expenses that Jennifer can deduct from her tax return for tax year 2019 is $100.

Explanation:

The amount of interest expenses that Jennifer can deduct from her tax return for tax year 2019 can be calculated using the following formula:

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Substituting the values into equation (1), we have:

Interest expenses deductible = ($1,200 / $6,000) * $500

Interest expenses deductible = 0.20 * $500

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Therefore, the amount of interest expenses that Jennifer can deduct from her tax return for tax year 2019 is $100.

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