Company A has the following balance sheet in market values with duration in brackets Assets Government...
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Company A has the following balance sheet in market values with duration in brackets Assets Government bonds 20 (20) ?? (10) 20 (1) Equipment Receivables Liabilities and Equity Short-term debt 10 (?) 25 (15) Long-term debt Equity 20 (8.5) a. What is the duration of the short-term debt? b. The yearly compounded risk-free interest rate currently is 5%. If it would go up by 1% percentage point then what would approximately be the new equity value? c. The company can exchange government bonds for receivables or vice verse. How much should the company hold in government bonds such that the equity has a duration of five years? Company A has the following balance sheet in market values with duration in brackets Assets Government bonds 20 (20) ?? (10) 20 (1) Equipment Receivables Liabilities and Equity Short-term debt 10 (?) 25 (15) Long-term debt Equity 20 (8.5) a. What is the duration of the short-term debt? b. The yearly compounded risk-free interest rate currently is 5%. If it would go up by 1% percentage point then what would approximately be the new equity value? c. The company can exchange government bonds for receivables or vice verse. How much should the company hold in government bonds such that the equity has a duration of five years?
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a Shortterm debt has a duration of 0 since it will be paid back within a ... View the full answer
Related Book For
Intermediate Financial Management
ISBN: 9780357516669
14th Edition
Authors: Eugene F Brigham, Phillip R Daves
Posted Date:
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