Ask Question
30 March, 11:38

You will be paying $10,200 a year in tuition expenses at the end of the next two years. Bonds currently yield 9%. a. What is the present value and duration of your obligation

+4
Answers (1)
  1. 30 March, 13:40
    0
    Present value of obligation is $17,942.94

    Duration 1.4785 years

    Explanation:

    Present value of obligation can be calculate by using following formula

    PV = Tuition payment x (1 + yield rate) ^-n

    PV of First year payment = $10,200 x (1 + 9%) ^-1 = 9,357.80

    PV of Second year payment = $10,200 x (1 + 9%) ^-2 = 8,585.14

    PV of Obligation = PV of First year payment + PV of Second year payment

    PV of Obligation = 9,357.80 + $8,585.14 = $17,942.94

    Duration

    Time in years PV of Payments Weight Duration (Time x Weight)

    1 $9,357.80 0.5215 0.5215 x 1 = 0.5215

    2 $8,585.14 0.4785 0.4785 x 2 = 0.9569

    Total $17,942.94 1.0000 1.4785
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “You will be paying $10,200 a year in tuition expenses at the end of the next two years. Bonds currently yield 9%. a. What is the present ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers