Question
Gimli must to pay $7000 to Legolas one year from today and $10750 to Arwen two years from today. To match the obligations, Gimli plans
Gimli must to pay $7000 to Legolas one year from today and $10750 to Arwen two years from today. To match the obligations, Gimli plans to purchase bonds today. The following bonds are available for purchase today: One-year zero-coupon bonds with 7% yield Two-year zero coupon bonds with 8% annual yield Two-year 9% par-value bond with annual coupons and 6% annual yield Gimli purchases the bonds so that the redemption amount of the two-year zero-coupon bond is 4 times the redemption amount of the two-year coupon bond. Find the purchase prices for each of these bonds if Gimli uses the bonds to exactly match the obligations. One-year zero-coupon bond: $ ________________ Two-year zero-coupon bond: $ ________________ Two-year coupon bond: $ __________________
Please give correct answer with 2 decimal places at least.
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