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The following bonds are currently traded in the economy. BondA: a 3-year coupon with a face value of $1000 and an annual coupon rate of

The following bonds are currently traded in the economy.

  • BondA: a 3-year coupon with a face value of $1000 and an annual coupon rate of 10%, currently traded at $1082.17
  • BondB: a 3-year coupon with a face value of $1000 and an annual coupon rate of 12%, currently traded at $1135.34
  • BondC: a 2-year coupon with a face value of $1000 and an annual coupon rate of 16%, currently traded at $1184.78

Using these bonds, construct a replicating portfolio for asset D, which is an asset that will pay out the following future cash flows:

  • Cash flow in year 1: $236
  • Cash flow in year 2: $1536
  • Cash flow in year 1: $628

If bA denotes the number of Bond A, bB denotes the number of Bond B and bC denotes the number of Bond C in the replicating portfolio of assets, What are (bA, bB, bC)?

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