Question
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 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. Ms X borrows 5000 at 5% annual effective interest, with payments at end of each year. The lender keeps the interest portion and accumulates the principal portion in a fund at 3.5% until loan is paid in full. Ms X pays 750 each year until a smaller payment will complete the loan payment. What is the amount of this last payment, including interest? (a) 350 (b) 84 (c) 724 (d) 524 (e) 566 (f) 687 Let AVB be Account Value Before Deposit or Withdrawal. Date 1/1/20 3/1/20 AVB 100 104 4/1/20 99 T/1/20 118 1/1/21 130 deposit 17 X withdrawal 9 Time weighted yield is 13.75%. Dollar Weighted yield is 12.81% Find T
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