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Elementary,Middle School,High School,College,University,PHD
Teaching Since: | Apr 2017 |
Last Sign in: | 327 Weeks Ago, 6 Days Ago |
Questions Answered: | 3232 |
Tutorials Posted: | 3232 |
MBA,MCS,M.phil
Devry University
Jan-2008 - Jan-2011
MBA,MCS,M.Phil
Devry University
Feb-2000 - Jan-2004
Regional Manager
Abercrombie & Fitch.
Mar-2005 - Nov-2010
Regional Manager
Abercrombie & Fitch.
Jan-2005 - Jan-2008
You will be paying $11,800 a year in tuition expenses at the end of the next two years. Bonds currently yield 9%. |
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a. |
What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.) |
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 |  |
Present value | $ |
Duration | years |
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b. |
What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Future redemption value" to 2 decimal places.) |
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 |  |
Duration | years |
Future redemption value | $ |
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You buy a zero-coupon bond with value and duration equal to your obligation. |
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c-1. |
Now suppose that rates immediately increase to 10%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
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Net position changes by | $ |
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c-2. |
What if rates fall to 8%? (Do not round intermediate calculations. Round your answer to 2 decimal places.) |
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Net position changes by | $ |
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