Question
2) 21.st Century Investments Company operates in both financial sector and projects management. For their long term planning consideration they want to win the bid
2) 21.st Century Investments Company operates in both financial sector and projects management. For their long term planning consideration they want to win the bid of an attractive project about newly established type of retirement funds management. People pay 18% of their salaries every month for taking place in the fund and it is guaranteed that more than 1 million people will be included for 30 years. The bid will be hold on exactly one year later. It is needed to pay the collateral (down payment) amount of $18.000.000 just before entering the bid as a kind of guarantee to manage the fund. 21.st Century Investments Company has a bond portfolio and decides to meet this amount from their portfolio by selling some amount of bonds. They have 100.000 shares of each of the two different zero coupon bonds like : Bond A has a face value of $1000 and 11 years maturity with 18% interest payment. (100.000 shares) Bond B has a face value of $1000 and 20 years maturity with 8% interest payment. (100.000 shares) If market interest rate is 5% which type of bond should be selected to meet all collateral amount?
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