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- Assume that you are preparing an amortization table for a three-year note with a stated and yield rate of 10% and 12%, respectively. Interest is payable every yearend. Which of the choices would be true? a. C4 - D4 = B4 b. E1 - D2 = E2 c. E3 + D3 = E4 d. B5 - D5 = C5Assume that l2t = 0.30% and that it = 0. If the one-year interest rate is 5% and the two-year interest rate is 5.75%, then it+1 equal to: is OA. 6.05% O B. 5.90% O C. 5.30% O D. 5.45%(1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest rate is 10%, compounded semiannually? (2) What is the PV of the same stream? (3) Is the stream an annuity? (4) An important rule is that you should never show a nominal rate on a time line or use it in calculations unless what condition holds? (Hint: Think of annual compounding, when INOM = EFF% = IPER.) What would be wrong with your answers to parts (1) and (2) if you used the nominal rate of 10% rather than the periodic rate, INOM/2 = 10%/2 = 5%?
- Use the following 10% present value factors: N 1: 0.9091 N = 2: 0.8264 N= 3: 0.7513 Assume you wish to receive $1,000 at the end of two years. Assuming an interest rate of 10% what amount would you need to deposit todayin order to receive the S1, 000? Round to the nearest penny if necessary.Suppose that a 10-year T-note is purchased with a face value of $20,000 and a coupon rate of 3.4% (a) What is the total return of this investment? (b) What is the average rate of retum? (a) The total return is $ (Simplity your answer.) (b) The average rate of return is%. (Simplify your answer. Round to two decimal places as needed.)Please use the following information to answer You have account paybles: ₤5 m in one year.InterestUS: 6.10% per annum & InterestUK: 9% per annumSpot exchange rate: $1.50/£ & Forward exchange rate: $1.46/£ (1-year maturity)Call option strike price: $1.46/£ & Put option premium: $0.02/£How much will you receive in $ if you use the forward contract hedge? You must show all work to earn credit. No credit will be given without supporting work. 5,000,000 GBP x $1.46 = $7,300,000 $7,300,000 x 6.10% x 1 year = $445,300 $7,300,000 + $445,300 = $7.7453 million 2. Draw a graph for the forward contract hedge. (X axis is the spot rate in the future. Y axis is “$ cash paid.”)
- An investor has a principal amount of $P. If he desires a payout (return) of 0.1P each year, how many years will it take to deplete an account that earns 8% per year? 0.1P = P(A/P, 8%,N), so N ∼=21 years. A payout duration table can be constructed for select payout percentages and compound interest rates. Complete the following table. (Note: table entries are years.) Summarize your conclusions about the pattern observed in the shown table.Assume you have the following asset and liability in your Balance Sheet: Asset - Bond A Modified Duration = 2.6 years Value = RM1.5 million Liability - Bond B Modified Duration = 3.1 years Value = RM1.0 million a. Calculate the duration gap. b. What is the expected change in Net Worth if interest increases by 1%? Assume previous interest is 10% c. What should or could you to achieve immunised balance sheet? Note: Please show all workings.Suppose that the 9-month and 12-month LIBOR rates are 4% and 4.2%, respectively. What is the value of an FRA where 5% is received and LIBOR is paid on £1 million for the quarterly period? All rates are quarterly compounded and expressed as per annum. Assume that LIBOR is used as the risk-free discount rate. Select one: a. £478.115 b. £422.870 c. £479.062 d. £426.132
- I calculated the PV value of a $100 payment stream at 1% for 6 years payable at the beginning of the year to be $585.34. Likewise, if I have a balance today of $584.34 in 6 years this balance would be paid off if I deduct $100 at the beginning of each year at 1% interest. (See image capture 1) However I run into issues whe I use two interest rates. Time Payment Rate PV 0 $100 1% 100/(1.01)^0=100 1 $100 1% 100/(1.01)^1=99.01 2 $100 1% 100/(1.01)^2=98.03 3 $100 2% 100/((1.01)^2*(1.02))=96.11 4 $100 2% 100/((1.01)^2*(1.02)^2)=94.22 5 $100 2% 100/((1.01)^2*(1.02)^3)=92.38 The Total PV for this stream is $579.75. So why doesn't the following equation yield zero: Time Payment Rate Balance…Provided are links to the present and future value tables: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.) a. How much would you have to deposit today if you wanted to have $55,000 in three years? Annual interest rate is 10%. b. Assume that you are saving up for a trip around the world when you graduate in three years. If you can earn 6% on your investments, how much would you have to deposit today to have $15,000 when you graduate? (Round your answer to 2 decimal places.) c-1. Calculate the future value of an investment of $666 for ten years earning an interest of 9%. (Round your answer to 2 decimal places.) c-2. Would you rather have $666 now or $1,800 ten years from now? d. Assume that a college parking sticker today costs $80. If the cost of parking is increasing at the rate of 6% per year, how much will the college parking sticker cost in seven years? (Round your answer to 2 decimal…Provided are links to the present and future value tables: (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to the nearest whole dollar.) a. How much would you have to deposit today if you wanted to have $66,000 in four years? Annual interest rate is 9%. b. Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 8% on your investments, how much would you have to deposit today to have $18,500 when you graduate? (Round your answer to 2 decimal places.) c-1. Calculate the future value of an investment of $787 for nine years earning an interest of 10%. (Round your answer to 2 decimal places.) c-2. Would you rather have $787 now or $1,800 nine years from now? d. Assume that a college parking sticker today costs $94. If the cost of parking is increasing at the rate of 5% per year, how much will the college parking sticker cost in eight years? (Round your answer to 2 decimal…