Bond Valuation

The idea of the present value factor (PVF) allows Go Green Insurance Company to compress the time dimension factor by being tide to exclusively worry of the amount of money it should set aside for bond purchase in the future (when compounded with a 10% interest rate). This concept allows the company to have the flexibility to easily acquire alternative and desirable bonds through the medium of money and the flexibility for diversification.

This report provides various recommendations that are of significance for the Go Green Insurance Company to incorporate in order to minimize the cost of acquiring bonds.

  1. In order to consistently match the cost of bonds and its liabilities, there should be an ample volume of regular business transaction in the bond market to help maintain a reliable and stable bond prices (Kulikova et al., 2010). As such, the company should purchase cost effective and consistently moving bonds.
  2. The company should also purchase only bonds that make a well-defi...