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Artemon [7]
2 years ago
11

A bank has $50 million in assets, $47 million in liabilities and $3 million in shareholders' equity. If the duration of its liab

ilities are 1.3 and the bank wants to immunize its net worth against interest rate risk and thus set the duration of equity equal to zero, it should select assets with an average duration of _________.
Business
1 answer:
Alisiya [41]2 years ago
5 0

Answer: 1.222

Explanation:

The Average duration can be derived from the formula:

Assets * Average Duration = Liabilities * Duration of Liabilities

Average Duration = (Liabilities * Duration of Liabilities) / Assets

= (47,000,000 * 1.3) / 50,000,000

= 61,100,000 / 50,000,000

= 1.222

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You are set to receive an annual payment of $12,100 per year for the next 17 years. Assume the interest rate is 7 percent. How m
uranmaximum [27]

Answer:

The difference in value is worth $8,269 more in money.

Explanation:

Case 1. Payments are made at the end of each year

So here, we will use the annuity formula for computing the present value of payments that we are receiving at the end of each year.

Here

Annual Cash flow is $12,100

Interest Rate "r" is 7%

And

Number of Payments "n" will be 17

Present Value = Cash flow * [1 - 1 / (1+r)^n] / r

By putting values, we have:

Present Value = $12,100 * [1 - 1 / (1 + 7%)^17] / 7%

Present Value = $12,100 * 9.763223

Present Value = $118,135

Now

Cash 2. Payments are arising at the start of each year

Just like the case above, we will use the annuity formula for computing the present value of payments that we are receiving at the start of each year. The first payment will be at worth the same because it is received in today's price.

So

Present Value = Cash flow     +       Cash flow * [1 - 1 / (1+r)^n] / r

So by putting values, that were used in case 1, we have:

Present Value = $12,100 + $12,100 * (1 - (1/1.07)^16) / 0.07

Present Value = $12,100 + $12,100 * 9.446649

Present Value = $126,404

Difference in Present Value = PV of Case 1      -    PV of Case 2

= $126,404 - $118,135 = $8,269

The difference in value is worth $8,269 more in money.

4 0
3 years ago
Equipment with a cost of $225,000 has an estimated salvage value of $15,000 and an estimated life of 4 years or 10,000 hours. It
elixir [45]

Answer:

The depreciation is $52,500

Explanation:

The formula to compute the depreciation under the straight-line method is shown below:

= \dfrac{(original\ cost - salvage\ value )}{Number\ of\ years}

= \dfrac{(\$225,000 - \$15,000)}{4\years}

= $52,500

Under the straight-line method, the depreciation expense should be the same for the remaining useful life. Life of the equipment or machine should always be expressed in years, not in hours.

So, these usage of hours should be ignored.

4 0
3 years ago
The accounts receivable turnover is computed as __________ divided by __________. sales; accounts receivable sales; average acco
tekilochka [14]

Answer:

sales ; average accounts receivables

Explanation:

Accounts receivable turnover refers to how a business firm manage its assets. Businesses, companies uses accounts receivables to know and quantify how perfectly goods bought on credit by their customers are being paid back. It also measures how business gives credit and collects back it's debt .It is calculated as net sales divided by average accounts receivables.

6 0
3 years ago
A publisher prints copies of a popular weekly tabloid for distribution and sale. The fixed costs are $500 per print run, with ea
Hatshy [7]

Answer:

500 + 0.40q

Explanation:

A publisher prints copies of a popular weekly tabloid for distribution and sale.

Given that,

Fixed costs = $500 per print run

Variable cost = $0.40

Therefore, the cost function is as follows:

Let the number of copies printed be q,

Cost function: C(q) = Fixed cost + Variable cost

                               = 500 + (0.40 × q)

                               = 500 + 0.40q

3 0
3 years ago
Both the Army and Marine Corps have a capability need to procure additional helicopters beyond the number specified in the curre
FinnZ [79.3K]

Answer:

The cost which will determine or estimate the technique used as a basis for requesting the funding to pay for the extra aircraft is the actual cost.

Explanation:

Actual cost is the cost or the actual expenditure made for acquiring the asset and it involves the expense of supplier invoiced and in addition to the cost to set up, test the asset and deliver.

So, both the Marine and the Army corps need to procure the additional helicopters beyond the numbers specified in contract. The actual cost will be used as basis for the funding to pay.

4 0
3 years ago
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