Yield to maturity in year 0	13%
Obligation of $2,658.44 to be paid out in 8 years
	Bond 1	Bond 2	Bond 3
Coupon rate	12.0%	13.6%	15.5%
Maturity	9	11	25
Face value	1,000	1,000	1,000
Bond price
Face value equal to $1,000 of market value
Duration
Yield to maturity in year 8	13%
	Bond 1	Bond 2	Bond 3
Bond price (in year 8), assume YTM=13%
Value of Reinvested coupons (in year 8)
Total
Multiply by percent of face value bought
Product (Terminal Value)
(c.) Would all three bonds be able to fund the obligation if YTM falls to 9% in year 8. Explain your answer (5 pts)
			Bond 1	Bond 2	Bond 3
		3%
		4%
		5%
		6%
		7%
	YTM (yr8)	8%
		9%
(e) Assume year 8 YTM could be different from 13%.		10%
Which bond is best suited to meet the obligation?		11%
Explain (5 pts)		12%
		13%
		14%
		15%
		16%
		17%
		18%
		19%
		20%