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.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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