You are a pension fund manager who has obligations over the years to come of: t: 2 CF: 11.5 2.5 The applicable rate is: 0.08 What is the modified duration of this pension obligation? 1 7 3 4 6.5
Q: Eric invested $2,000 at the beginning of every 6 months in an RRSP for 11 years. For the first 9…
A: The FV of an investment refers to the combined value of the cash flows of the investment at a…
Q: The LeMond Corporation just purchased a new production line. Assume that the fir planned to…
A: In straight line depreciation there is uniform annual depreciation of equipment over the life of…
Q: resident Company purchased merchandise from Captain Corporation on September 30, 2024. Payment was…
A: The annual payment of loan is $4200 beginning on September 30, 2027.The purchase made on September…
Q: The return on Stock A is 20%, 10 %, and -25% when the market condition is good, normal, and bad,…
A: Co-variance is shows the relationship between the two stock returns and standard deviation.
Q: If you borrow $11,472 and are required to pay back the loan in five equal annual installments of…
A: Yield to maturity can be calculated by following function in excel=RATE (nper, pmt, pv, [fv],…
Q: Robin borrowed $3000.00 from HSBC Bank Canada. The line of credit agreement provided for…
A: Interest is paid on the unpaid loan balance and payment goes on reducing with decrease in loan…
Q: John wants to buy a property for $127,500 and wants an 80 percent loan for $102,000. A lender…
A: The mortgage loans are the secured loans and these loans are paid by the monthly payments that carry…
Q: Jana has $2.000 saved but doesn’t want to spend it on a down payment. She wants to keep it in her…
A: A loan refers to a contract where a borrower receives money from a lender on the promise that the…
Q: What is the value of a call option if the underlying stock price is $83, the strike price is $75,…
A: Call options gives the right but not the obligation to buy at the strike price. Using Black Scholes…
Q: Use the following data: Down payment (to finance) vehicle) Monthly loan payment Length of loan Value…
A: The total costs of buying include the down payment, total monthly loan payment and ending asset…
Q: You invested three thousand US dollars and purchased shares of a German corporation when the…
A: Foreign exchange is that amount which shows the relationship between the country's currency. With…
Q: useful life of 8 years. The company uses a discount rate of 12% in its capital value of the…
A: NPV is the financial break even point and NPV should be net present value should be zero to be…
Q: Use the expected return-beta equation from the CAPM. What is the expected return for a stock if the…
A: According to Capital asset pricing model ,k= Rf+[ b*(Rm-Rf) ]wherek= expected return for a stockRf=…
Q: An investor has two bonds in his portfolio that have a face value of $1,000 and pay an 11% annual…
A: Bonds can be referred to as the debt units that need to be issued to raise funds for a fixed tenure…
Q: Starting on the day Monica was born, his mother has invested $40 at the beginning of every month in…
A: Future value refers to the estimated value of an investment at a future date, taking into account…
Q: Which of the following regression outcomes indicates the asset with the greatest total risk? • large…
A: In this question, we are required to determine the most risky combination, among the given options.
Q: Kolby’s Korndogs is looking at a new sausage system with an installed cost of $725,000. This cost…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: nderson International Limited is evaluating a project in Erewhon. The project w Year 0 DHZ34 1 2…
A: NPV is the most used method for selection of projects based on time value of money and can be found…
Q: Crane Company is considering buying a new farm that it plans to operate for 10 years. The farm will…
A: NPV or Net Present value refers to the present value of the operating cash flow less the initial…
Q: The recognition that dividends are dependent on earnings, so a reliable dividend forecast is based…
A: The market value of a firm is equal to the present value of its expected future cash flows.
Q: Now assume that your portfolio only includes a risky asset, Asset C and a risk-free asset, Asset D.…
A: Here,Weight Alloted to Risky Asset Asset C is 30%Exoected Return to Risk Free Asset Asset D is…
Q: Bank of America (BAC) is currently trading for $15 per share. The stock pays no dividends. A…
A: According to Put call parity theory there is certain relationship between Put,Call and Stock Price.…
Q: Steven, age 43, earns $80,000 annually; and his wage replacement ratio has been determined to be…
A: In capital preservation model safety of fund is given more importance and is conservative model of…
Q: 3. A 10-year $2000 bond pays semi-annual coupons at j;= 6%. What is the purchase price if the bond…
A: The bond can be defined as the debt units that are introduced in the financial market by the…
Q: (Evaluating liquidity) The Allen Marble Company has a target current ratio of 2.0 but has…
A: The objective of the question is to find out how much additional short-term funding Allen Marble…
Q: Over the last five years, the returns on ABC stock and the S&P/TSX Composite Index were as follows:…
A: The formula for beta is =SLOPE (known_ys,known_xs) where known Y values and known X values stand for…
Q: What is the NPV of Pigpen's project? Note: Enter your answer in thousands, not in millions, rounded…
A: Net Present Value (NPV) is a financial concept widely used in investment analysis and capital…
Q: The Tidewater State Bank has $1,000 in total assets (all of which are earning assets), $700 of which…
A: Total assets= $1,000Repriced assets = $700Total liabilities = $800Repriced liabilities =…
Q: Dime a Dozen Diamonds makes synthetic diamonds by treating carbon. Each diamond can be sold for…
A: Fixed costs 206000.00Selling price per diamond 130.00Material cost per diamond 80.00Discount rate…
Q: Michael owns a portfolio that consists of the following two bonds: • Bond A: $1,000 par value bond…
A: Bond duration:Duration takes into account both the coupon payments received and the final principal…
Q: Harriet Marcus is concerned about the financing of a home. She saw a small cottage that sells for…
A: Loan amount= Amount of cottage * (1-Down payment %)= 75000*(1-20%)= 60000
Q: A stock has a required return of 14%, and a retention rate of 40%. The stock’s price-earnings…
A: Required Rate of Return = r = 14%Retention Rate = rr = 40%Price Earning Multiple = pem = 14
Q: Blue Angel, Inc., a private firm in the holiday gift industry, is considering a new project. The…
A: NPV is the Capital Budgeting technique used to evaluate the projects for the capital investment…
Q: Your firm is considering the launch of a new product, the XJ5. The upfront development cost is $10…
A: NPV is an important capital budgeting metric. NPV stands for net present value. Essentially NPV is…
Q: A machine costing $32,000 to buy and $5,000 per year to operate will mainly save labor expenses in…
A: NPV is also known as Net Present Value.. It is a capital budgeting technique which helps in decision…
Q: A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at…
A: The duration of the bond refers to the weighted average of the time for which the PV of the cash…
Q: A) What expected return should an investor expect from investments in common stock? You are given…
A: CAPM is also known as capital assets pricing model. It shows the expected return with the help of…
Q: Question-. If a pure monopolist can price discriminate by separating buyers into two or more groups:…
A: In this question, we are required to determine the implication of a monopolist dividing buyers into…
Q: fter a long career an engineer retires with $1.4 million in a retirement account. The engineer…
A: In retirement planning money should be sufficient to meet the income needed on retirement based on…
Q: a. What is project NPV? Note: Negative amount should be Indicated by a minus sign. Do not round…
A: Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment or…
Q: You must evaluate the purchase of a proposed spectrometer for the R&D department. The purchase price…
A: Initial Investment Outlay= Base Price + Modification cost + Increase in Working Capital - Tax…
Q: An amount of $34,000 is borrowed for 7 years at 3.75% interest, compounded annually. If the loan is…
A: Future value refers to the value of the asset present today at some future date due to inflation,…
Q: Sunland Company earns 9% on an investment that pays back $80,000 at the end of each of the next 5…
A: Annual payment (C) = $80,000Rate of return (r) = 0.09Period (n) = 5 yearsInvestment amount = ?This…
Q: You want to create a portfolio equally as risky as the market, and you have $500,000 to invest.…
A: Beta of portfolio is computed as follows:-Bp = (Ba*Wa) + (Bb*Wb)+(Bc*Wc)+(Br*Wr)whereBp =beta of…
Q: Your factory has been offered a contract to produce a part for a new printer. The contract would…
A: NPV means Net present value.It is a capital budgeting technique used for making investment…
Q: You are 20 years old today. You want to retire at age 50 and have $4 million at that time. Assume…
A: The present value of money refers to the concept that money available in the future is worth less…
Q: Delphino’s has sales for the year of $127,300 and cost of goods sold of $86,700. The firm carries an…
A: As per our guidelines we are supposed to answer only one question (if there are multiple questions…
Q: For an APR of 15% per year, if the interest is compounded weekly, determine the nominal rate per (a)…
A: Nominal interest rate is the basic interest rate without inflation or compounding taken into…
Q: Calculate the duration of a five-year bond with a face value of $1,000 and a coupon rate of 8%.…
A: Duration of the bond is the period required to recover all cash flows from the bond and the is…
Q: You must evaluate a proposal to buy a new milling machine. The purchase price of the milling…
A: The net present value (NPV) is a key capital budgeting technique for project and investment…
Step by step
Solved in 3 steps with 2 images
- Assume that actual returns and expected returns to plan assets in a defined benefit pension plan are +$10 and +$12, respectively. What is the effect in the current period on pension expense? Select One: a.Pension expense is increased by $10 b.Pension expense is reduced by $10 c.Pension expense is reduced by $12 d.None of the listed answersAmong the three measures of the pension obligation: VBO, ABO, and PBO the measure(s) using future salaries in the computation is(are) (Enter 1, 2, 3, or 4 that represents the correct answer): VBO PBO ABO and PBO VBO, ABO, and PBO.Ma1. Assume the below information about a firm’s defined benefit pension plan: Pension Fund Beginning Balance Cash Funding by the Firm Actual Investment Income Payments to Retirees Ending Balance 2 + 5 - 15 42 Pension Obligation Beginning Balance Service Interest Payments to Retirees Changes in Assumptions Ending Balance 9 5 0 49 Expected investment income was greater than actual investment income by $5. What was the funded status of the pension plan at the beginning of the year? Select one: a. Underfunded by $15 b. Overfunded by $10 c. Fully funded d. Underfunded by $10
- Th e relationship between the periodic pension cost and the plan’s funded status is bestexpressed in which of the following?A . Periodic pension cost of –£483 = Ending funded status of –£4,774 – Employer contributions of £693 – Beginning funded status of –£4,984.B . Periodic pension cost of £1,322 = Benefi ts paid of £1,322.C . Periodic pension cost of £210 = Ending funded status of –£4,774 – Beginning fundedstatus of –£4,984Net interest cost is a component of pension expense under IFRS. How is net interest cost calculated? Select one: O a. The increase in the DBO over the period, net of the increase in the plan assets over the period. O b. Interest expense on the DBO, net of actual interest income earned on plan assets. O c. Interest expense on the defined benefit obligation (DBO), net of expected interest income earned on plan assets. O d. The increase in the DBO over the period, net of the increase in the plan assets over the period.5. What is the total pension expense in 2021?6. How much from the pension expense is recognized in the 2021 profit or loss?7. How much from the pension expense is recognized in the 2021 other comprehensiveincome or loss?
- 8. How much is the plan asset at fair market value, December 31, 2021?9. How much is the accumulated benefit obligation, December 31, 2021?10. What is the prepaid(accrued) pension expense as of December 31, 2021?b. How does each component of pension expense affect pension expense during the period (increase, decrease, or uncertain)? c. What is the difference between the accumulated pension obligation and the projected pension obligation? d. What determines whether a pension plan is underfunded or overfunded?1. What is the actual return on pension plan assets? 2. What is the amount of actuarial gain or loss that will be taken to other comprehensive income? if gain positive amount, if loss negative amount Example: gain --> 1,000 loss --> (1,000)
- Question 14 what give rises to the changes in PBO balance? A- service cost and interest cost B- prior service cost that is caused by a change in pension formula C- changes in life expectancy estimates D- all of the above O A O C ODPlease answer the following questions about defined benefit pension plans: Companies with defined benefit pension plans must recognize pension expenses each period. What are the five components of pension expense? Briefly describe each component. How does each component of pension expense affect pension expense during the period (increase, decrease, or uncertain)? What is the difference between the accumulated pension obligation and the projected pension obligation? What determines whether a pension plan is underfunded or overfunded?Current accounting standards require that the discount rate used for pension plans be: Multiple Choice estimated future average market rates. the rates at which the pension benefits could effectively be settled. current market rate for the year. the average market rate since the beginning of the plan.