54178.JARRUCE.pdf - Saved 2. Joe must pay liabilities of 1,000 due one year from now and another 2,000 due three years f

[answerhappygod]

54178 Jarruce Pdf Saved 2 Joe Must Pay Liabilities Of 1 000 Due One Year From Now And Another 2 000 Due Three Years F 1 (33.09 KiB) Viewed 32 times

54178.JARRUCE.pdf - Saved 2. Joe must pay liabilities of 1,000 due one year from now and another 2,000 due three years from now. There are two available investments: Bond I: A one-year zero-coupon bond that matures for 1000. The yield rate is 5% per year Bond II: A two-year zero-coupon bond with face amount of 1,000. The yield rate is 6% per year. At the present time the one-year forward rate for an investment made two years from now is 5.5% Joe plans to buy amounts of each bond. He plans to reinvest the proceeds from Bond Ilin a one-year zero-coupon bond. Assuming the reinvestment earns the forward rate, calculate the total purchase price of Bond I and Bond II where the amounts are selected to exactly match the liabilities.