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Katrina has obligations to pay liabilities of 1,500 due 1 year from now, 1,800 due 2 years from now, and 1,400 due 3 years from
Katrina has obligations to pay liabilities of 1,500 due 1 year from now, 1,800 due 2 years from now, and 1,400 due 3 years from now. There are three available investments: Bond A: A one-year annual coupon bond with face amount of 1,500 with an annual coupon rate of 6%. The annual effective yield-to-maturity is 5%. Bond B: A two-year annual coupon bond with face amount of 1,500 with an annual coupon rate of 4%. The annual effective yield-to-maturity is 7%. Bond C: A three-year annual coupon bond with face amount of 1,500 with an annual coupon rate of 8%. The annual effective yield-to-maturity is 10%. She plans to exactly match the liabilities using three available bonds. Calculate the number of units to purchase each of the bond. Calculate the price of each bond. Calculate the total cost amount of purchasing three available bonds to exactly match the liabilities Katrina owes
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