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Please finish the immunization table below. This investor is trying to lock in an interest rate of return of 8% for an investment horizon of
Please finish the immunization table below. This investor is trying to lock in an interest rate of return of 8% for an investment horizon of 5 years using a corporate bond with 8% annual coupon, selling at a par value of $1000 with six years to maturity, and a duration close to 5 years. Assumes market interest rates decrease from 8% to 7% at the end of the third year. Please use only one excel formula.
\begin{tabular}{|c|c|r|r|} \hline Year t & Cash flow from bond & & Terminal Value of Reinvested Cash Flow \\ \hline 1 & & & \\ \hline 2 & & & \\ \hline 3 & & & \\ \hline 4 & & & \\ \hline 5 & & & \\ \hline 5 (sale of bond) & 1009.3 & & \\ \hline & & Total & \\ \hline & & Investor's required wealth at 8% & \\ \hline & & Difference & \\ \hline \end{tabular} \begin{tabular}{|c|c|r|r|} \hline Year t & Cash flow from bond & & Terminal Value of Reinvested Cash Flow \\ \hline 1 & & & \\ \hline 2 & & & \\ \hline 3 & & & \\ \hline 4 & & & \\ \hline 5 & & & \\ \hline 5 (sale of bond) & 1009.3 & & \\ \hline & & Total & \\ \hline & & Investor's required wealth at 8% & \\ \hline & & Difference & \\ \hline \end{tabular}
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