A company has liability payments of 2.000 due in 6 months and another 2,000 due in 1 year. Two investments are available
Posted: Thu May 12, 2022 6:27 am
A company has liability payments of 2.000 due in 6 months and
another 2,000 due in 1
year. Two investments are available:
a) a 6-month bond with face value 1.000, 4% nominal annual coupon
rate payable semi-
annually, and 5% nominal annual yield convertible
semi-annually.
b) A 1 year bond with face value 1,000, 7% nominal annual
coupon rate payable semi-annually.
and 6% nominal annual yield convertible semi-annually.
What is the total cost of these bonds the company purchase in order
to match its liabilities
exactly?
another 2,000 due in 1
year. Two investments are available:
a) a 6-month bond with face value 1.000, 4% nominal annual coupon
rate payable semi-
annually, and 5% nominal annual yield convertible
semi-annually.
b) A 1 year bond with face value 1,000, 7% nominal annual
coupon rate payable semi-annually.
and 6% nominal annual yield convertible semi-annually.
What is the total cost of these bonds the company purchase in order
to match its liabilities
exactly?