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18. A company agrees to pay 10,000 at the end of year 1 and year 2. The company will buy a combination of two bonds
18. A company agrees to pay 10,000 at the end of year 1 and year 2. The company will buy a combination of two bonds at a total cost of X in order to exactly match its obligation: (i) 1-year 5% annual coupon bond with a yield rate of 5% (ii) 2-year 6% annual coupon bond with a yield rate of 5%. Calculate X
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