Question
Consider the following cash flows. All market interest rates are 12%. What is the duration of these cash flows? Year 0 1 2 3 4
Consider the following cash flows. All market interest rates are 12%. What is the duration of these cash flows?
| Year | 0 | 1 | 2 | 3 | 4 |
| Cash flow | 100 | 110 | 130 | 230 |
An investor buys a $10,000 par, 6.25 percent annual coupon (paid semiannually) TIPS security with five years to maturity. If inflation every six months over the investor's holding period is 3 percent, what is the final payment the TIPS investor will receive?
Step by Step Solution
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Step: 1
To calculate the duration of the cash flows we need to find the present valueweighted average of the ...
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Financial Accounting and Reporting a Global Perspective
Authors: Michel Lebas, Herve Stolowy, Yuan Ding
4th edition
978-1408066621, 1408066629, 1408076861, 978-1408076866
