A corporation has liabilities that require it to pay 1,000 in.one year (at t=1), 2,000 one...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A corporation has liabilities that require it to pay 1,000 in.one year (at t=1), 2,000 one year later (at t-2), and 3,000 one year after that (at t=3). The corporation will purchase high-quality bonds to fund these liabilities. The following 3 bonds are available: 1-year zero-coupon bond with a 4% yield to maturity 2-year zero-coupon bond with a 6% yield to maturity 3-year bond with 7% annual coupons and an 8% yield to maturity (Assume that each bond is available for purchase in any face amount. All rates are annual effective rates.) The corporation purchases a combination of these bonds that will exactly fund its 3 liability payments. What is the total cost of the bonds that are purchased? A) 5,101 B) 5,110 C) 5,120 D) 5,123 E) 5,128 A corporation has liabilities that require it to pay 1,000 in.one year (at t=1), 2,000 one year later (at t-2), and 3,000 one year after that (at t=3). The corporation will purchase high-quality bonds to fund these liabilities. The following 3 bonds are available: 1-year zero-coupon bond with a 4% yield to maturity 2-year zero-coupon bond with a 6% yield to maturity 3-year bond with 7% annual coupons and an 8% yield to maturity (Assume that each bond is available for purchase in any face amount. All rates are annual effective rates.) The corporation purchases a combination of these bonds that will exactly fund its 3 liability payments. What is the total cost of the bonds that are purchased? A) 5,101 B) 5,110 C) 5,120 D) 5,123 E) 5,128
Expert Answer:
Related Book For
Quantitative Analysis for Management
ISBN: 978-0133507331
12th edition
Authors: Barry Render, Ralph M. Stair, Michael E. Hanna, Trevor S. Ha
Posted Date:
Students also viewed these algorithms questions
-
Njabulo is a 72 year old accountant at an accounting firm. He earns a taxable income of R58 470 per month and 13th cheque (bonus).He contributes 7.5% of his basic salary towards pension fund. He...
-
A two-year bond with par value $1,000 making annual coupon payments of $93 is priced at $1,000. a. What is the yield to maturity of the bond? (Round your answer to 1 decimal place.) b.What will be...
-
A newly issued 20-year maturity, zero-coupon bond is issued with a yield to maturity of 8% and face value $1,000. Find the imputed interest income in the first, second, and last year of the bond's...
-
Our model of pollution in this chapter assumed that emissions are a pure private bad, and that people have no ability to protect themselves from the adverse consequences of exposure. In reality,...
-
One evening when you went to pick up your child at the KinderKare, the owner mentioned to you that she would like to sell the business. You have always wanted to run a day care, and would like to try...
-
Find the standard deviation for the indicated sets of numbers. A calculator may be used. The following data giving the mean number of days of rain for Vancouver, B.C., for the 12 months of the year...
-
What laboratory analysis may be helpful to a forensic accountant?
-
BONDS ISSUED AT FACE VALUE Ito Co. issued the following bonds: Date of issue and sale: ........April 1, 20-1 Principal amount: ..........$300,000 Sale price of bonds: .........100 Denomination of...
-
. (Capital structure analysis) The Karson Transport Company currently has net operating income of $498,000 and pays interest expense of $197,000. The company plans to borrow $1.19 million on which...
-
Hauck Financial Services has a number of passive, buy-and-hold clients. For these clients, Hauck offers an investment account whereby clients agree to put their money into a portfolio of mutual funds...
-
Your first assignment was to enter forecasting data. How will SAP use this information?
-
WalMart, the world's largest retailer, is legendary for squeezing price concessions and ever greater operating efficiencies from its suppliers. To what extent do such concessions hurt financial...
-
8. An electric field = 1.0 x 105 N/C i causes the 5.0 g point charge to hang at an angle of 20. What is the charge on the ball? Steps: - Identify the forces on the system (Force of gravity, tension...
-
Answer ALL questions. [30 MARKS] Read the following case study and answer the questions that follow: NORDIC LIMITED: WORKING CAPITAL AND CAPITAL BUDGETING Nordic Limited commenced operations on 01...
-
How has the emergence of SWIFT gpi (Global Payments Innovation) transformed the landscape of cross-border payments, and what are its implications for payment speed, transparency, tracking, and cost...
-
In your own words explain How do size differences affect group performance? Question #2 What is the difference between a group and a team? Question #3 What conditions or contextual factors...
-
In thin-film interference colors, the colors change with Group of answer choices viewing angle of the observer distance to the observer temperature of the observer
-
Define a traverse in Surveying?
-
1. Does Steve need additional information from Iverstine and Walker? 2. What would you recommend? In 1979, Steve Blake founded Blake Electronics in Long Beach, California, to manufacture resistors,...
-
The German towns around the Black Forest are rep-resented by nodes in the network below. The dis-tances between towns is shown in kilometers. Find the shortest route from city 1 to city 16. If...
-
Repeat the simulation in Problem 13-21, assuming that the reorder point is 4 units rather than 2. Compare the costs for these two situations. In Problem 13-21, Dumoor Appliance Center sells and...
-
BSW Inc. had a weekly payroll of \(\$ 5,000\) for three employees with mandatory withholdings of social security tax \((7.65 \%)\), federal withholdings of \(\$ 1,000\), and state withholdings of...
-
On August 31, 2020, Pine Company issued a 9 -month, \(12 \%\) note payable to National Bank in the amount of \(\$ 900,000\). Interest is due at maturity. Record the entries for Pine Company on the...
-
Jet Air Inc. collected \(\$ 300\) cash from a customer who purchased a one-way airline ticket on June 1, 2020, for a flight from Minneapolis to New York on August 15, 2020. Record the entry on June...
Study smarter with the SolutionInn App