LNP is a company with a liability of $110million due in 10 years. The company's onlyasset is $70 million held in cash. Throughoutthis question, assume the term structure ofinterest rates is flat at 5%.a) Determine the present value of thecompany's liability.b) Without doing any calculations, brieflyexplain why holding all its assets in cash isproblematic for LNP from an interest rate riskmanagement perspective.

Determine the present value of the company’s liability. LNP Present Value of Liability = Debt…

a) Determine the present value of the company's liability. b) Without doing any calculations, briefly explain why holding all its assets in cash is problematic for LNP from an interest rate risk management perspective.

a) Determine the present value of the company's liability. b) Without doing any calculations, briefly explain why holding all its assets in cash is problematic for LNP from an interest rate risk management perspective.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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