Questions from Financial Markets

Q: An employee with 25 years of service at a company is considering

An employee with 25 years of service at a company is considering retirement at some time in the next 10 years. The employer uses a final pay benefit formula by which the employee receives an annual be...

Q: An employer uses a final pay formula to determine retirement payouts to

An employer uses a final pay formula to determine retirement payouts to its employees. The annual payout is 3 percent of the average salary over the employees’ last three years of service times the to...

Q: Your company sponsors a 401(k) plan into which you

Your company sponsors a 401(k) plan into which you deposit 12 percent of your $60,000 annual income. Your company matches 50 percent of the first 5 percent of your earnings. You expect the fund to yie...

Q: Using the information in Problem 7, and assuming all variables remain

Using the information in Problem 7, and assuming all variables remain constant over the next 25 years, what will your 401(k) fund value be in 25 years (when you expect to retire)? Data from Problem 7...

Q: Your company sponsors a 401(k) plan into which you

Your company sponsors a 401(k) plan into which you deposit 10 percent of your $120,000 annual income. Your company matches 75 percent of the first 10 percent of your earnings. You expect the fund to y...

Q: Bank 1 can issue five-year CDs at an annual rate

Bank 1 can issue five-year CDs at an annual rate of 11 percent fixed or at a variable rate of LIBOR + 2 percent. Bank 2 can issue five-year CDs at an annual fixed rate of 13 percent or at a variable r...

Q: A financial institution has the following market value balance sheet structure:

A financial institution has the following market value balance sheet structure: a. The bond has a 10-year maturity, a fixed-rate coupon of 10 percent paid at the end of each year, and a...

Q: Consider the following income statement for Watch over U Savings Inc.

Consider the following income statement for Watch over U Savings Inc. (in millions): a. What is Watch over U’s expected net interest income at year-end? b. What will be the net int...

Q: If a bank invested $50 million in a two-year

If a bank invested $50 million in a two-year asset paying 10 percent interest per year and simultaneously issued a $50 million one-year liability paying 8 percent interest per year, what would be the...

Q: Assume that a bank has assets located in Germany worth €150 

Assume that a bank has assets located in Germany worth €150 million earning an average of 8 percent. It also holds €100 in liabilities and pays an average of 6 percent per year. The current spot rate...