You will be paying $8,600 a year In tultion expenses at the end of the next two years. Bonds currently yleld 7%. Q. What is the present value and duration of your obligation? b. What maturity zero-coupon bond would Immunize your obligation? c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately Increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tultion obligation? d. What if rates fall Immediately to 5% ? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D 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.) \table[[,,,],[Present value,,,,,],[Duration,,years,,,]] You will be paying $8,600 a year in tuition expenses at the end of the next two years. Bonds currently yield 7%.a. What is the present value and duration of your obligation?b. What maturity zero-coupon bond would Immunize your obligation?c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediatelyIncrease to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuitionobligation?d. What if rates fall Immediately to 5%?Complete this question by entering your answers in the tabs below.Required A Required BRequired C Required DWhat is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to2 decimal places and "Duration" to 4 decimal places.)Present valueDurationyearsRequired B >

The objective of the question is to calculate the present value and duration of the tuition…

Answered: You will be paying $8,600 a year in…

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 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...

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You will be paying $8,600 a year In tultion expenses at the end of the next two years. Bonds currently yleld 7%. Q. What is the present value and duration of your obligation? b. What maturity zero-coupon bond would Immunize your obligation? c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately Increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tultion obligation? d. What if rates fall Immediately to 5% ? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D 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.) \table[[,,,],[Present value,,,,,],[Duration,,years,,,]]