You are given $67,556,416.88 to manage so that the fund will have at least $100,000,000 available in 2030, 10 years from now. The yield curve is flat, and the current interest rate for all maturities is 4%. The only bonds that you can buy are annual coupon Treasury bonds with 1-year maturities and bonds issued in 2020 that mature in 2040 (currently a maturity of 20 years). All bonds are issued at par.

1. How many of each Treasury bond should you buy today?

$_________________1-Year

$_________________20-Year

2. If all interest rates increase by 1% (to 5%) in year (2021) and then remain at 5%, how much will the fund have in 2030? Reinvest all coupon payments in one-year bonds. (The answer should be fairly close to the goal amount if you selected the portfolio correctly. If you set up the Excel spreadsheet right, you can see that you will have the goal amount regardless of the new interest rate.)

$_______________________

1. Very briefly, why was the amount not equal to exactly $100,000,000? (Im looking for a key word.)