Company ABC has liabilities of 20,000, 50,000 and 70,000 due at the end of years 1, 2 and 3 respecti (absolutely) match these liabilities using the following assets: I. a one-year zero coupon bond with a yield of 4% II. a two-year zero coupon bond with a yield of 5% III. a three-year coupon bond with annual coupons of 6% and a yield of 5.5% What is the total cost of the asset portfolio that will exactly match the liabilities? A B 124,100 110,200
Company ABC has liabilities of 20,000, 50,000 and 70,000 due at the end of years 1, 2 and 3 respecti (absolutely) match these liabilities using the following assets: I. a one-year zero coupon bond with a yield of 4% II. a two-year zero coupon bond with a yield of 5% III. a three-year coupon bond with annual coupons of 6% and a yield of 5.5% What is the total cost of the asset portfolio that will exactly match the liabilities? A B 124,100 110,200
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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Transcribed Image Text:Company ABC has liabilities of 20,000, 50,000 and 70,000 due at the end of years 1, 2 and 3 respectively. The company would like to exactly
(absolutely) match these liabilities using the following assets:
I. a one-year zero coupon bond with a yield of 4%
II. a two-year zero coupon bond with a yield of 5%
III. a three-year coupon bond with annual coupons of 6% and a yield of 5.5%
What is the total cost of the asset portfolio that will exactly match the liabilities?
A
B
с
D
E
124,100
110,200
117,500
129,000
114,900
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