21 May WHAT SHOULD BE THE YIELD TO MATURITY ON A FIVE YEAR YEAR ZERO COUPON BOND?
You own an oil pipeline that will generate a 52 million cash return over the coming year. The pipeline’s operating cosr are negligible, and it is expected tomlast for a very long time. Unfortunately,the volume of oil shipped is declining and cash flows are expected to decline by 4% per year. The discount rate is 10%.
a) What is the PV of the pipeline’s cash flows if its cash flow are assumed to last forever??
b) What is the PV of the cash flows if the pipeline is scrapped after 20years??
2. you have estimated spot rates as follows;
R1= 5.00% r2= 5.40% r3=5.7% r4= 5.9% r5=6.0%
a) What are the discount factors for each date(that si, the PV of $1 paid in year t)
b) Calculate the PV of the following bonds assuming annual coupons i) 5%, two year bond ii) 5% five year bond and iii) 10% five year bond
c) Explain intuitively why the yield to maturity on the 10% bond is less than that on the 5% bond
d) What should be the yield to maturity on a five year year zero coupon bond?
e) Show that the correct yield to maturity on a five year annuity is 5.75%
f) Explain intutitively why the yield on the five year bonds described in part c must lie between the yield on a five zero coupon bond and a five year annuity.
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.