Question
The company has an obligation and is paying a single payment debt in 12 years. Debt (obligation paid 12 years) $13,000,000.00 Rate Maturity (in years)
The company has an obligation and is paying a single payment debt in 12 years.
| Debt (obligation paid 12 years) | $13,000,000.00 |
| Rate | Maturity (in years) | Price | YTM | Coupon Freq | |
| Bond 1 | 8% | 10 | 1,000 | .075 | Semi-Annual |
| Bond 2 | 6% | 20 | 800 | .075 | Semi-Annual |
| Bond 3 | 4% | 30 | 600 | .075 | Semi-Annual |
A) Find the Macauly Duration for each bond
B) Calculate the PV of Obligation
C) Pick 2 bonds and apply the immunization process using the given YTM. Find the quantity of each of the 2 bonds to achieve the obligation.
Step by Step Solution
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A Mac aul ay s duration is a measure of a bond s sensitivity to changes in interest rates It is calculated as the weighted average of the time until e...
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Accounting for Governmental and Nonprofit Entities
Authors: Earl R. Wilson, Jacqueline L Reck, Susan C Kattelus
15th Edition
978-0256168723, 77388720, 256168725, 9780077388720, 978-007337960
