1. A client deposits $4.2 million in stock into a GRAT. The client will receive $180,000/year for 20 years, then the portfolio will transfer to the beneficiary. The §7520 Rate is 3%. What will be the amount of the bequest charged against the estate and gift tax exemption?
2. Given a bond pays an annual coupon of $66, has a face value of $1000, and has 17 years to maturity, what is its price if the YTM=7.1%?
Based on this, what is your estimate of modified duration? Use the face value as the beginning value and your answer here for the ending value after the YTM changes from 6.6% to 7.1%.Assume you buy this bond and can reinvest the coupons at 2%. What will be the future value of your investment?
3. Given a bond pays an annual coupon of $52, has a face value of $1000, and has 12 years to maturity, what is its price if the YTM=5%?
Based on this, what is your estimate of modified duration? Use the face value as the beginning value and your answer here for the ending value after the YTM changes from 5.2% to 5.0%.Assume you buy this bond and can reinvest the coupons at 2%. What will be the future value of your investment?