Companies often buy bonds to meet a future liability or cash outlay. Such an investment is called a dedicated portfolio since the proceeds of the portfolio are dedicated to the future liability. In such a case, the portfolio is subject to reinvestment risk. Reinvestment risk occurs because the company will be reinvesting the coupon payments it receives. If the YTM on similar bonds falls, these coupon payments will be reinvested at a lower interest rate, which will result in a portfolio value that is lower than desired at maturity. Of course, if interest rates increase, the portfolio value at maturity will be higher than needed. Suppose Ice Cubes, Inc. has the following liability due in five years. The company is going to buy bonds today in order to meet the future obligation. The liability and current YTM are below.

Amount of liability: $100,000,000

Current YTM: 8%

A. assume that immediately after the company purchase the bonds, interest rate rise by 6%. what is the value of the porfolio in five years under these circumstances? do not round in between calculations

B.assume that immediately after the company purchase the bonds, interest rate rise by 6%. what is the holding period yield (HPY) for the five years?

C.suppose instead the bond have a coupon rate of 10% while the YT is still at 8%. What is the face value of the bonds the company has to purchase today in order to pay its future obligation?