Question: Bonds \& Equity You are required to build a $18 million portfolio of bonds, approximately consisting of 55% zero-coupon and 45% coupon XML bonds. You require Rf+3.5% p.a. yield-tomaturity on zero-coupon bonds that have a 3 year maturity and face value of $1,000,000. You require Rf+6.75% p.a. yield-to-maturity on coupon bonds that have a 5 year maturity, a face value of $100,000 and are paying a coupon rate of 9% p.a. To construct the portfolio, you will purchase (4 marks) zero-coupon bonds, (4 marks) coupon bonds with (1 marks) in capital left reaming. Government bonds are yielding 2% pa. After 1.5 years, XML company earnings have fallen, elevating the credit risk of the company such that buyers in the market require a YTM on it's zero-coupon bonds of Rf +4.5% p.a. and Rf+7.5% p.a. for it's coupon bonds. Government bonds in 1.5 years are expected to yield 3%. Selling your holdings of XML bonds will result in a total profit/loss of (3 marks) for the zero-coupon bonds and (3 marks) for the coupon bonds