NOTE: THIS PROBLEM MUST BE SOLVED IN EXCEL, with NO ROUNDING of INTERMEDIATE RESULTS Consider a bond that has irregular cash flow promises before it matures in 10 years. Assume the discount rate is a constant 8% across all maturities. Year Promised Payments 0 1 100 2 250 3 300 4 450 5 500 6 500 7 600 8 650 9 800 10 1000 (a) what is the Macaulay Duration of this set of cash flows? Answer correctly to 2 decimal places. (b) Assume a financial intermediary needs $800,000 in exactly T years from today, where T is the "duration" in years you found in part (a). What $ investment is required in these bonds so that the firm will have $800,000 in T years. Calculate your answer correct to the nearest dollar. Note to get the correct answer for (b) do not round your answer to part (a) during the calculation. This should be done in excel.

NOTE: THIS PROBLEM MUST BE SOLVED IN EXCEL, with NO ROUNDING of INTERMEDIATE RESULTS Consider a bond that has irregular cash flow promises before it matures in 10 years. Assume the discount rate is a constant 8% across all maturities. Year Promised Payments 0 1 100 2 250 3 300 4 450 5 500 6 500 7 600 8 650 9 800 10 1000 (a) what is the Macaulay Duration of this set of cash flows? Answer correctly to 2 decimal places. (b) Assume a financial intermediary needs $800,000 in exactly T years from today, where T is the "duration" in years you found in part (a). What $ investment is required in these bonds so that the firm will have $800,000 in T years. Calculate your answer correct to the nearest dollar. Note to get the correct answer for (b) do not round your answer to part (a) during the calculation. This should be done in excel.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 20P

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