Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please urgent Some multinational corporations and banks run recruiting talent programs that offer about two years of diversified rotations in various business units. This recruiting

please urgent image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Some multinational corporations and banks run recruiting talent programs that offer about two years of diversified rotations in various business units. This recruiting system is a great opportunity to experience of breadth of rules across the business. Before taking over a fixed position in the marketing team, there is a rotation to the finance department. particularly you were assigned to the treasury team whose functions are cash management and funding. your mentor is a seasoned senior analyst who has 7-year working experience at the corporation ABC. she will be involved in your training and will give you feedback on the projects you would participate. 2. Zero-coupon Bonds: For now, Corporation ABC has managed to maintain a decent revenue stream during the lockdown because 70% of its revenue comes from a business line that sells necessity products directly through supermarkets and online. Hence ABC still has some surplus of cash which is ready to invest. Your mentor considers that ABC surplus cash must be invested in zero-coupon bonds. Find below the secondary market rates of US Treasury Bills (T-Bills) of 3-month and 1-year. The graph below also depicts the Federal Funds rates. FRED Federal Funds Target Range - Upper Limit 3-Month Treasury Bilt Secondary Market Rate 1 Year Treasury B Secondary Market Rate 10 25 20 Percent 1.5 10 05 Jul 2015 Jan 2016 2016 Jan 2017 2017 Jan 2018 2018 Jan 2019 2019 Jan 2020 Shaded areas indicate U.S. recessions Source: Board of Governors of the Federal Reserve System (US) fred.stlouised.org a) As of June 2019, which of these T-bills had a higher price? Which was the Term Premium? b) Is there a relationship between the Term structure of the T-Bills rates and the Fed Funds rate? c) Today, a T-Bill with a tenure of 3-month pays 0.10% and that of 1-year pays 0.15% (both interest rates are per year). Calculate the price of both Treasury Bills. d) Imagine that ABC could only invest in these two T-bills. ABC also expects that its revenues might decrease as future economic recovery might take longer than expected. Which T-bill should ABC Corporation Buy

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics And Personal Finance

Authors: Irvin Tucker, Joan Ryan

1st Edition

1133562108, 978-1133562108

More Books

Students also viewed these Finance questions

Question

5. Describe the main retirement benefits.pg 87

Answered: 1 week ago

Question

5. Explain how ERISA protects employees pension rights.pg 87

Answered: 1 week ago