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A liability of 1,000 is due 6 months from now and another 1,000 is due one year from now. There are two available instruments: A.
A liability of 1,000 is due 6 months from now and another 1,000 is due one year from now. There are two available instruments: A. A 6-month bond with face amount of 1,000, 8% nominal coupon convertible semi-annually, yielding 6% nominal converted semi-annually. B. A one-year bond with face amount of 1,000, 5% nominal coupon convertible semi-annually, yielding 7% semi-annually. What is the implied effective annual yield rate which is required to match the liabilities with the total investment amount of the two investments
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