Question 12

You have a planning horizon of H = 6 years and with to immunize your investment for that horizon. You attempt to do so by buying a perpetual bond that pays $100 annually and has a YTM of 20% p.a. You will reinvest the coupons throughout this 6-year period and, additionally, you will sell the bond at the end of that 6-year period. Find the total cash flow you will have 6 years from now if interest rates decrease to 19% just after you buy the bond, and then remain at that new level throughout your planning horizon. Give the answer with two decimals; e.g., 1,234.56. As always, do not include the dollar sign in your answer.

Question 13

21% just after you buy the bond, and then remain at that new level throughout your planning horizon. Give the answer with two decimals; e.g., 1,234.56. As always, do not include the dollar sign in your answer.

Question 14

Based on your calculations in the previous 3 problems, choose the most appropriate answer.

	a.You are partially, but not completely, immunized.
	b.You are immunized against interest rate fluctuations because the bond's coupon rate is CR = 10%.
	c.You are immunized against interest rate fluctuations because the interest rate when you bought the bond was 20%.
	d.It's not possible to know if you are immunized because the duration of a perpetual bond is hard, if not impossible, to calculate.
	e.You are immunized against interest rate fluctuations because D = H.
	f.You are definitely NOT immunized.

Question 15

You have a planning horizon of H = 3 years and with to immunize your investment for that horizon. You attempt to do so by buying a perpetual bond that pays $100 annually and has a YTM of 20% p.a. You will reinvest the coupons throughout this 3-year period and, additionally, you will sell the bond at the end of that 3-year period. Find the total cash flow you will have 3 years from now if interest rates remain unchanged throughout your planning horizon. Give the answer with two decimals; e.g., 1,234.56. As always, do not include the dollar sign in your answer.

Question 16

You have a planning horizon of H = 3 years and with to immunize your investment for that horizon. You attempt to do so by buying a perpetual bond that pays $100 annually and has a YTM of 20% p.a. You will reinvest the coupons throughout this 3-year period and, additionally, you will sell the bond at the end of that 3-year period. Find the total cash flow you will have 3 years from now if interest rates decrease to 19% just after you buy the bond, and then remain at that new level throughout your planning horizon. Give the answer with two decimals; e.g., 1,234.56. As always, do not include the dollar sign in your answer.

Question 17

You have a planning horizon of H = 3 years and with to immunize your investment for that horizon. You attempt to do so by buying a perpetual bond that pays $100 annually and has a YTM of 20% p.a. You will reinvest the coupons throughout this 3-year period and, additionally, you will sell the bond at the end of that 3-year period. Find the total cash flow you will have 3 years from now if interest rates increase to 21% just after you buy the bond, and then remain at that new level throughout your planning horizon. Give the answer with two decimals; e.g., 1,234.56. As always, do not include the dollar sign in your answer.

Question 18

Based on your calculations in the previous 3 problems, choose the most appropriate answer.

	a.You are definitely NOT immunized.
	b.You are partially, but not completely, immunized.
	c.You are immunized against interest rate fluctuations because D = H.
	d.You are immunized against interest rate fluctuations because the bond's coupon rate is CR = 10%.
	e.You are immunized against interest rate fluctuations because the interest rate when you bought the bond was 20%.
	f. It's not possible to know if you are immunized because the duration of a perpetual bond is hard, if not impossible, to calculate.