It is assumed that 25% of the monthly salary( including bonuses) is allocated for investment. Find the accumulated value when 100% of this monthly investment budget is invested in this bond. Find AV when only 30% is invested in this bond.

 

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Using Excel: Given Start date: 1 January 2023 Annual Base Salary: 60,000 increasing 6% at the start of each year paid at the end of each month. Starting Bonus: 20,000 paid with the first salary Performance bonus: 15,000 for first five years and 20,000 for the next five years paid at the end of the year s(t)= Beta_0+ Beta_1*exp(-lambda_1*t) + Beta_2*t*lambda_1*exp(-lambda_1*t) + Beta_2*t*lambda_2*exp(-lambda_2*t) where: t=time from start date where each month is treated of equal length and spot rates are annual nominal rates compounded monthly. Beta_0= 3.91 Beta_1-1.43 Beta_2 = -2.67 Beta_3= 0.26 Lambda_1 = 0.62 Lambda 2 = 0.83 Calculate forward rates from spot rates obtained from the formula above. Briefly explain the shape of the s(t) curve. Find the accumulated value at the end of 10 years (end of December 2032). Using Excel: Given Start date: 1 January 2023 Annual Base Salary: 60,000 increasing 6% at the start of each year paid at the end of each month. Starting Bonus: 20,000 paid with the first salary Performance bonus: 15,000 for first five years and 20,000 for the next five years paid at the end of the year s(t)= Beta_0+ Beta_1*exp(-lambda_1*t) + Beta_2*t*lambda_1*exp(-lambda_1*t) + Beta_2*t*lambda_2*exp(-lambda_2*t) where: t=time from start date where each month is treated of equal length and spot rates are annual nominal rates compounded monthly. Beta_0= 3.91 Beta_1-1.43 Beta_2 = -2.67 Beta_3= 0.26 Lambda_1 = 0.62 Lambda 2 = 0.83 Calculate forward rates from spot rates obtained from the formula above. Briefly explain the shape of the s(t) curve. Find the accumulated value at the end of 10 years (end of December 2032).

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To solve this problem we need to follow these steps 1 Calculate the monthly salary including bonuses for each year 2 Calculate the monthly investment ... View the full answer