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5. As a member at a pension fund desk, you are planning a payment of $600,000 to be made four years from now and you
5. As a member at a pension fund desk, you are planning a payment of $600,000 to be made four years from now and you would like to make investments in bonds to meet this future obligation. Three bonds are available, all paying semi-annual coupons (with a par of \$100) and currently yielding 5.36\% (compounded continuously). Detailed bond information is as follows: A) How much to invest in Bonds A and B if they are used for immunization? B) How much is your investment after four years if the yield remains at 5.36% ? C) How much is your investment worth after five years if the yield changes to 4.9% right after immunization? Would you have a shortfall if you didn't immunize? D) Suppose you just took over a bond portfolio from another desk which consists of $200,000 investment in Bond A and $600,000 investment in Bond B. You are given another $400,000 to invest. Your mandate is to ensure a yield of 5.36% over the next six years. While you allocate the $1,200,000 fund among the three bonds, you must maintain the initial proportions of investment in A and B (i.e., maintaining a ratio of 1/3 ). How would you allocate the $1,200,000 fund to achieve this mandate
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