Questions from General Investment

Q: To continue with Sundanci, Abbey Naylor, CFA, has been

To continue with Sundanci, Abbey Naylor, CFA, has been directed to determine the value of Sundanci’s stock using the free cash flow to equity (FCFE) model. Naylor believes that Sundanci’s FCFE will gr...

Q: What savings rate from real income (Spreadsheet 21.3)

What savings rate from real income (Spreadsheet 21.3) will produce the same retirement annuity as a 15% savings rate from nominal income?

Q: Under the flat tax (Spreadsheet 21.4), will a

Under the flat tax (Spreadsheet 21.4), will a 1% increase in ROR offset a 1% increase in the tax rate?

Q: You are being interviewed for a job as a portfolio manager at

You are being interviewed for a job as a portfolio manager at an investment counseling partnership. As part of the interview, you are asked to demonstrate your ability to develop investment portfolio...

Q: Is the decrease in a bond’s price corresponding to an increase in

Is the decrease in a bond’s price corresponding to an increase in its yield to maturity more or less than the price increase resulting from a decrease in yield of equal magnitude?

Q: Short-term interest rates are more volatile than long-term

Short-term interest rates are more volatile than long-term rates. Despite this, the rates of return of long-term bonds are more volatile than returns on short-term securities. How can these two empiri...

Q: a. Find the duration of a 6% coupon bond making

a. Find the duration of a 6% coupon bond making annual coupon payments if it has three years until maturity and a yield to maturity of 6%. b. What is the duration if the yield to maturity is 10%?

Q: A nine-year bond paying coupons annually has a yield of

A nine-year bond paying coupons annually has a yield of 10% and a duration of 7.194 years. If the bond’s yield changes by 50 basis points, what is the percentage change in the bond’s price?

Q: A pension plan is obligated to make disbursements of $1 million

A pension plan is obligated to make disbursements of $1 million, $2 million, and $1 million at the end of each of the next three years, respectively. Find the duration of the plan’s obligations if the...

Q: If the plan in the previous problem wants to fully fund and

If the plan in the previous problem wants to fully fund and immunize its position, how much of its portfolio should it allocate to one-year zero-coupon bonds and perpetuities, respectively, if these a...