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What is the price and duration of each bond? Suppose that a pension fund has to make a payment of $1 million in 2 years
What is the price and duration of each bond?
Suppose that a pension fund has to make a payment of $1 million in 2 years time. It can hold a one year pure discount bond that will pay $1000 in I year, or a 3 year bond that will pay a coupon of $100 each year, will be redeemed for $1,000 at the end of the third year. The yield on each bond is 15%Step by Step Solution
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