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Thank u 6. (Bond selection) Consider the four bonds having annual payments as shown in Table 3.9. They are traded to produce a 10% yield.
Thank u 6. (Bond selection) Consider the four bonds having annual payments as shown in Table 3.9. They are traded to produce a 10% yield. Tablo 30 (a) Determine the price of each bond. (b) Determine the duration of each bond (not the modified duration). (c) Suppose you owe $1,000 at the end of 2 years. Concern about interest rate risk suggests that a portfolio consisting of the bonds and the obligation should be immunized. If VA,VB,VC, and VD are the total values of bonds purchased of types A,B,C, and D, respectively, what are the necessary constraints to implement the immunization? [Hint: There are two equations. (Do not solve.)] (d) In order to immunize the portfolio, you decide to use bond C and bond D. Find the amounts (in total value) of each of bonds to purchase
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