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(1 point) Suppose that a corporation is obligated to pay a debt of $330000 in 12 years. (a) Determine the present value of the debt
(1 point) Suppose that a corporation is obligated to pay a debt of $330000 in 12 years. (a) Determine the present value of the debt if the current market yield is 5.6% compounded semi-annually. Present Value of Debt = $ (b) In order to pay the debt, the corporation plans to create a portfolio consisting of the following two par-valued bonds that pay semi-annual coupons. Bond Coupon Rate, c(2) (as a percent) 3.00 3.00 Face Value in dollars) 3000 2000 Maturity (in years) 15 25 Purchase Price (in dollars) 2215.44 1304.86 Duration in years) 11.620 15.756 A B Determine how much should be invested in each of the bonds using the immunization method. Amount to be invested in Bond A = $ Amount to be invested in Bond B = $ (c) Using the result in part (b), determine the number of shares (to 1 decimal) of each of Bond A and Bond B that should be purchased. Determine how much should be invested in each of the bonds using the immunization method. Amount to be invested in Bond A = $ Amount to be invested in Bond B = $ (c) Using the result in part (b), determine the number of shares (to 1 decimal) of each of Bond A and Bond B that should be purchased. Number of shares of Bond A = Number of shares of Bond B = (d) Using the results in part (C), determine the present value and the duration of the portfolio of bonds. [Note: These answers should be "close" to values from above but will be off due to rounding. Present Value of Portfolio = $ Duration of Portfolio = years (to 3 decimals)
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