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Leland Price must pay $7,000 six months from now and $14,000 one year from now. He wishes to purchase bonds so that together they form
Leland Price must pay $7,000 six months from now and $14,000 one year from now. He wishes to purchase bonds so that together they form a portfolio of assets that exactly match his liabilities. Available bonds are a six-month zero-coupon $1,000 bond that has a 3.0255% annual yield, and a one-year $1,000 par-value 8% bond with semiannual coupons and a 4% nominal yield (convertible semiannually). How much must Leland pay to purchase the bonds? Assume that he may buy any quantity he wishes of each bond. (Round your answer to the nearest cent.)
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