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Firm ABC has a single liability of 5000 due in 8 years and will invest in 5-year and 10-year bonds to meet the first two
Firm ABC has a single liability of 5000 due in 8 years and will invest in 5-year and 10-year bonds to meet the first two conditions of immunization. Both bonds can be purchased in any face amount. The 5-year bond pays semi-annual coupons while the 10-year bond is zero-coupon. The nominal annual interest rate for market, bonds, and coupons is 6%. What face amount of the 5-year bond is needed?
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Introduction to Finance Markets Investments and Financial Management
Authors: Melicher Ronald, Norton Edgar
15th edition
9781118800720, 1118492676, 1118800729, 978-1118492673
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