Question
In: Finance
Suppose that a company has a series of liabilities with the due dates as follows:: In...
Suppose that a company has a series of liabilities with the due dates as follows:: In 6 months: $2,000,000, In 1 year: $2,200,000, In 1.5 years: $2,500,000, In 2 years: $3,200,000, In 2.5 years: $3,700,000, In 3 years: $4,300,000, In 3.5 years: $4,700,000, In 4 years: $5,100,000. The company is considering investing in four different bonds: (1) a 1-year Treasury Bill with a face value of $1,000 and no coupon, (2) a 2-year Treasury note with a face value of $1,000 and an annual coupon rate of 1.5%, (3) a 3-year Treasury note with a face value of $1,000 and an annual coupon rate of 1.90%, and (4) a 5-year Treasury note with a face value of $1,000 and an annual coupon rate of 2.30%. All Treasury notes make 2 (semi-annual) coupon payments per year. The yield to maturity on all bonds is 1.45%. How many of each of these bonds the company should buy to be fully funded and be immunized against interest rate risk? please step by step in excel!
Solutions
jeff jeffy answered 1 year agoRelated Solutions
A company has liabilities of $10,000 due in 1 year and $20,000 due in 2 years....
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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?
3.00%
3.20%
3.40%
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Show all works, and please show ur work it with math steps and
illustrations instead of excel...
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