sk21. Consider the following balance sheet (in millions) for an FI:AssetsLiabilitiesDuration 10 years$950Duration = 2 yearsEquity$86090a. What is the Fl's duration gap?b. What is the FI's interest rate risk exposure?c. How can the FI use futures and forward contracts to put on a macrohedge?d. What is the impact on the FI's equity value if the relative change in interestrates is an increase of 1 percent? That is, A R/(1 + R) = 0.01.e. Suppose that the FI macrohedges using Treasury bond futures that are cur-rently priced at 96. What is the impact on the FI's futures position if the relativechange in all interest rates is an increase of 1 percent? That is, AR/(1 + R) = 0.01.Assume that the deliverable Treasury bond has a duration of nine years.f. If the FI wants to macrohedge, how many Treasury bond futures contractsdoes it need?

Here's a step-by-step, human-like breakdown of the questions:a. What is the FI's Duration Gap?After…

Answered: sk 21. Consider the following balance…

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter4: Time Value Of Money

Section: Chapter Questions

Problem 12MC: (1) What is the value at the end of Year 3 of the following cash flow stream if the quoted interest...

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PLEASE ANSWER IN EXCEL FORMAT - A= ( B+ * )
(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%?
Need all parts.....
Suppose the term structure of risk-free interest rates is as shown below: 5 yr 7 yr 10 yr 20 yr Term 1 уг 2 yr 3 yr 3.24 3.79 4.09 5.05 2.07 2.46 2.71 Rate (EAR %) a. Calculate the present value of an investment that pays $1,000 in two years and $3,000 in five years for certain. b. Calculate the present value of receiving $100 per year, with certainty, at the end of the next five years. To find the rates for the missing years in the table, linearly interpolate between the years for which you do know the rates. (For example, the rate in year 4 would be the average rate in year 3 and year 5.) c. Calculate the present value of receiving $1,800 per year, with certainty, for the next 20 years. Infer rates for the missing years using linear interpolation. (Hint: Use a spreadsheet.)
What is the interest rate “r” if PV=$1250 and the FV=$2150 in year t=10?
Suppose the term structure of risk-free interest rates is as shown below: 5 yr 7 yr 10 yr 20 yr Term 1 yr 2 yr 3 yr 2.42 2.77 3.31 3.75 4.15 4.93 1.98 Rate (EAR %) What is the present value of an investment that pays $103 at the end of each of years 1, 2, and 3? If you wanted to value this investment correctly using the annuity formula, what discount rate should you use? What is the present value of an investment that pays $103 at the end of each of years 1, 2, and 3? The present value of the investment is $294.08. (Round to the nearest cent.) If you wanted to value this investment correctly using the annuity formula, what discount rate should you use? The discount rate you should use if you want to use the annuity formula is 2.94%. (Round to two decimal places.)
28. Consider a bank dealer who faces the following spot rates and interest rates. What should he set his 1- year forward ask price at? Bid So(S/E) S1.42 = €1.00 F360(S/E) A. $1.4324/€ B. $1.4358/€ C. $1.4662/€ D. $1.4676/€ Ask $1.45 = €1.00 Borrowing 4.25% APR is je 3.10% APR Lending 4% APR 3% APR
1. How much would you have at the end of five years if you invested P50,00Q at 10.5% interest rate? a) P63,814.08 b) P82,372.34 c) P142,650.71 2. Discounting basically looks for which type of value? a) Present Value b) Future Value 3. The risk return trade-off can be summed up by which phrase? a) Time is gold b) No pain, No Gain c) A penny saved is a penny earned. 4. Check if your answer is correct by calculating the FV of your answers in Item 2 and the interest earned. a) FV P1,000,000; Interest P393,000.11 b) FV P1,000,000; Interest P390,000.11 c) FV P1,000,000; Interest P394,000.11 5. If you want to have a million pesos in five years, how much should you deposit/invest right now at a 10.5% interest rate? a) P350,506.50 b) P783,526.17 c) P606,999.89
which of the following investments that pay will $5000 in 12 years have a higher price today? A. The security that earns an interest rate it 8.25% B. The security that earns an interest rate of 5.50%?
This is part a) question and it's answer in order to answer part b) question Question: You hold a consol that pays a coupon C in perpetuity. The current interest rate is i, and the average expectation in the market is that this will remain unchanged. What will be the price of the consol today? answer : According to the question we need to calculate the current price of the perpetual consol. Perpetual consoles are priced differently because their expected income is spread through an indefinite period. So, perpetual consoles are priced using the current yield. The current yield is calculated as:- coupon amountMarket price×100coupon amountMarket price×100 After calculating the current yield price is calculated by the above formula where, i = Current interest rate y = yield so, the price of this consol will be Price = i/y I please need the solutions for part b) question b) In the next period however, the interest rate changes unexpectedly to i . What is the new price of the bond? If…
Current interest rates are i$ = 4%;i€ = 6%. Expected interest rates next year are: i$ = 7%;i € = 3%. The expected spot rate in two years is S2($/€) = 1. Use the asset market approach to compute the current spot rate S0($/€). Please type in the number without the currency signs. For example, if your answer is $1.25/€, then type in 1.25 as your final answer. Please keep at least three decimal places (up to 5 decimal places)
Suppose you work as a broker in an investment company, and there is an expectation that the market interest rate will be 0.031. based on this expectation you are required to calculate the market price for the following CD; Issue date: 1 January 2021 Maturity date:10 May 2021. The face value OMR 10000. Interest on CD: 5 percent.

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