A company is required to pay 50, 000(1.075)y in y years. The company invests 30, 000 in a 28−year zero-coupon bond and 20, 000 in a 35−year zero-coupon bond to Redington immunize its position against small changes in interest rates, based on an annual effective interest rate of 7.5%. Calculate y showing your work.
A company is required to pay 50, 000(1.075)y in y years. The company invests 30, 000 in a 28−year zero-coupon bond and 20, 000 in a 35−year zero-coupon bond to Redington immunize its position against small changes in interest rates, based on an annual effective interest rate of 7.5%. Calculate y showing your work.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A company is required to pay 50, 000(1.075)y in y years. The company invests 30, 000 in a 28−year zero-coupon bond and 20, 000 in a 35−year zero-coupon bond to Redington immunize its position against small changes in interest rates, based on an annual effective interest rate of 7.5%. Calculate y showing your work.
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