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A company has liabilities of $10,000 due in 1 year and $20,000 due in 2 years....

A company has liabilities of $10,000 due in 1 year and $20,000 due in 2 years. The company would like to cash flow match these liabilities with a combination of the following assets:

a 2-year bond with annual coupons of 5% yielding 4%

a 1-year bond with annual coupons of 6% yielding 3%

What is the IRR on the asset portfolio created?

  1. 3.00%

  2. 3.20%

  3. 3.40%

  4. 3.60%

  5. 3.80%

Solutions

Expert Solution

IRR =3.20%

jeff jeffy answered 1 year ago
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