Shan has informed you that she would like to cash out part of her portfolio in 8 years and use the proceeds to buy a vacation home in the south of France. Her portfolio has a current market value of $400,000, which is invested in the following 4 corporate bonds:
• $100,000 in a 12-year, 8.25% bond that has a current market value of $785;
• $100,000 in a 10-year, zero-coupon bond that has a current market value of $520;
• $100,000 in a 15-year, 12.5% bond that has a current market value of $1,180;
• $100,000 in a 12-year, 9.25% bond that has a current market value of $920.
The 4 corporate bonds are investment grade, noncallable, and nonconvertible.
Shan has also asked that you explore immunising her bond portfolio.
a) Find the current yield and yield to maturity for each bond. Use annual compounding.