BroadStreet Bank has just been given a $10,000,000, 5 year CD depositby the local municipality. The bank has agreed to pay 8%, compoundedannually on this deposit. The bank wishes to choose one debt investment tocover this deposit, so that they have earnings from this investment to justcover the interest and CD principal when it comes due in 5 years. They arelooking at the following 3 possibilities for investment:Bond Maturity Coupon YTM Duration1 5 0.00% 8.00% 5.002 6 7.90% 8.00% 5.003 7 17.15% 8.00% 5.00• Show that each of three investment will cover the future payout required by the CD, even if market rates increase or drop by ½ % by the end of 5 years 4. BroadStreet Bank has just been given a $10,000,000, 5 year CD depositby the local municipality. The bank has agreed to pay 8%, compoundedannually on this deposit. The bank wishes to choose one de bt investment tocover this depo sit, so that they have earnings from this investment to justcover the interest and CD principal when it comes due in 5 years. They arelooking at the following 3 possibilities for investment:BondMaturityCouponYTMDuration50.00%8.00%5.0067.90%8.00%5.003717.15%8.00%5.00• Show that each of three inve stment will cover the future payout required bythe CD, even if market rates increase or drop by % % by the end of 5 years

Bonds are considered a safe source of investment as it carries less risk and is at that part of the…

BroadStreet Bank has just been given a $10,000,000, 5 year CD deposit by the local municipality. The bank has agreed to pay 8%, compounded annually on this deposit. The bank wishes to choose one debt investment to cover this deposit, so that they have earnings from this investment to just cover the interest and CD principal when it comes due in 5 years. They are looking at the following 3 possibilities for investment: Bond Maturity Coupon YTM Duration 1 5 0.00% 8.00% 5.00 2 6 7.90% 8.00% 5.00 3 7 17.15% 8.00% 5.00 • Show that each of three investment will cover the future payout required by the CD, even if market rates increase or drop by ½ % by the end of 5 years

BroadStreet Bank has just been given a $10,000,000, 5 year CD deposit by the local municipality. The bank has agreed to pay 8%, compounded annually on this deposit. The bank wishes to choose one debt investment to cover this deposit, so that they have earnings from this investment to just cover the interest and CD principal when it comes due in 5 years. They are looking at the following 3 possibilities for investment: Bond Maturity Coupon YTM Duration 1 5 0.00% 8.00% 5.00 2 6 7.90% 8.00% 5.00 3 7 17.15% 8.00% 5.00 • Show that each of three investment will cover the future payout required by the CD, even if market rates increase or drop by ½ % by the end of 5 years

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 14P

See similar textbooks

Similar questions

BroadStreet Bank has just been given a $10,000,000, 5 year CD deposit by the local municipality. The bank has agreed to pay 8%, compounded annually on this deposit. The bank wishes to choose one debt investment to cover this deposit, so that they have earnings from this investment to just cover the interest and CD principal when it comes due in 5 years. They are looking at the following 3 possibilities for investment BondMaturityCouponYTM Duration 0.00% 8.00%5.00 7.90% 8.00%5.00 17.15% 8.00%5.00 Show that each of three investment will cover the future payout required by the CD, even if market rates increase or drop by 2 % by the end of 5 years 567 123
An accounting firm agrees to purchase a computer for $180,000 (cash on delivery) and the delivery date is in 270 days. How much do the owners need to deposit in an account paying 0.85% compounded quarterly so that they will have $180,000 in 270 days? (a) State the type. sinking fund amortization present value future value ordinary annuity (b) Answer the question. (Round your answer to the nearest cent.) $
.020.2.j SN IM MY ASK Y Clearlake Optical has a $50,000 note that comes due in 3 years. The owners wish to create a sinking fund to pay this note. If the fund earns 1.5% compounded semiannually, how much must each semiannual deposit be? (Round your answer to the nearest cent.) Need Help? Read it Talk to a Tutor
1. What will be the present value, if $6,800 is discounted back 4 years at an interest rate of 4% compound semi-annually? 2. as the Fund manager for bank of Trinidad and Tobago Limited, you are to advise the following two clients based on their respective financial situations a) your best friend has asked to assist him in making the best investment out of the following options. which would you advise him to choose and why Option 1 $12,000 in 5 year's time at 6% interest Option 2 $15,000 in two year's time at 9% Option 3 $15,000 today. no strings attached Option 4 $5,000 each year for 2 years at 7% percent compounded semi- anually
(2.1) Please provide step by step explaination You are offered an investment which will cost you $100,000 and will result in a guaranteed return of $108,000 in one year. Your bank offers a government-guaranteed deposit with an interest rate of 7% p.a. Based on this information only, would you accept this investment? Select one: a. Yes b. No c. Don't know
不 a. Use the appropriate formula to determine the periodic deposit. b. How much of the financial goal comes from deposits and how much comes from interest? Periodic Deposit Rate Time Financial Goal $? at the end of each year 3% compounded annually 15 years $130,000 Click the icon to view some finance formulas. a. The periodic deposit is $ (Do not round until the final answer. Then round up to the nearest dollar as needed.) this View an example Get more help 4 Clear all Chec
A person wants to have (5000 CU) pay for his education at the end of each year for (6 years). If the bank rate of interest is (11.5%), how much money has to be deposit at present. Q2:A company invests in one of three alternatives, the life of all alternatives is estimated to be (5 years) with the following investments, annual returns, and salvage value: Alternatives 3 200000 CU 70000 CU 50000 CU Details Alternatives 1 Alternatives 2 Investment 150000 CU 175000 CU Annual equal return 60000 CU 70000 CU 15000 CU 25000 CU Salvage value Determine the best alternative based on Net Present Worth Comparison (NPW) by assuming i=10%.
Assume you borrow $10,000 today and promise to repay the loan in two payments, one in year 2 and the other in year 4, with the one in year 4 being only half as large as the one in year 2. At an interest rate of 10% per year, the size of the payment in year 4 will be closest to:a. $4280b. $3975c. $3850d. $2335
Having P10,000 to invest and do not want to take any risk, it will put the funds in a savings account at the local bank. Of the following choices, which one will produce the largest sum at the end of 3 years? An account that earns interest. (with computation) a. Compounded Annually b. Compounded Monthly c. Compounded Quarterly d. Simple Interest (assume same interest rates and period for thecomputation)
Columbia Bank & Trust has just given you a $20,000 term loan to pay for a new concrete mixer. The loan requires five equal annual end-of-the-year payments. If the loan provides the bank with a 12 percent return, what will be your annual payments? a. $5,547.85 b. $6,000 c. $3,148.12 d. $1,666.67
1. Compute the initial value of the money if the borrower needs deposit the accumulated amount of P59, 137 to the bank after 8 months and 24 days if the money has the interest rate of 19% per annum. 2. What is the equivalent percent of 20% compounded quarterly if converted to compounded monthly? 3. The Philippine Association of Board Examiners (PABE) desires to award a P1,600 scholarship annually to deserving students for as long as its scholarship fund shall last. The fund was started July 1, 1977 by a donor in the amount of P24,000. The PABE invested this sum at that time at 4% per annum and plans on adding P200 each year to the fund from its dues Starting July 1, 1978 for as long as awards are made. A. For how many years starting July 1, 1978 can scholarship be awarded? B.What will be the balance in the fund after the last award was made?
Sebastopol Movie Theater will need $180,000 in 3 years to replace the seats. What deposit should be made today in an account that pays 0.8% compounded semiannually? (a) State the type. A. sinking fund B. present value C. ordinary annuity D. amortization E. present value of an annuity (b) Answer the question. (Round your answer to the nearest cent.)