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25. A corporation has liabilities that require annual payments of 10,000 at the end of each of the next 3 years (i.e., the corporation must
25. A corporation has liabilities that require annual payments of 10,000 at the end of each of the next 3 years (i.e., the corporation must pay 10,000 at t=1, t=2, and t=3). The corporation has purchased 2-year and 3-year annual-coupon bonds with the following characteristics: Term (years) 2 3 Coupon Rate 5% 6% The face amounts of these 2 bonds have been chosen so that they will generate total payments of 10,000 at t=2 and 10,000 at t=3. (Note: Each bond's maturity value is equal to its face amount.) The corporation now purchases a 1-year bond that pays 4% annual coupons, so that the total amount received at t=1 will also be 10,000. What is the face amount of that 1-year bond? A) 8,639 B) 8,985 C) 9,143 D) 9,282 E) 9,434
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