An investor has invested in three types of bonds: Corporate bonds, Government bonds, and Municipal bonds. Let x, y, and z represent the amounts invested in thousands of dollars in each type of bond, respectively. The investor has the following constraints: • The total investment amount is $300,000. • The investor wants to allocate twice as much money in Corporate bonds as in Municipal bonds. • The investment in Government bonds should be $50,000 more than in Corporate bonds. (a) Generate the system of linear equations representing the above constraints. (b) Solve, using matrix algebra, the system of equations from Question 1 to find the amounts invested in each type of bond.

An investor has invested in three types of bonds: Corporate bonds, Government bonds, and Municipal bonds. Let x, y, and z represent the amounts invested in thousands of dollars in each type of bond, respectively. The investor has the following constraints: • The total investment amount is $300,000. • The investor wants to allocate twice as much money in Corporate bonds as in Municipal bonds. • The investment in Government bonds should be $50,000 more than in Corporate bonds. (a) Generate the system of linear equations representing the above constraints. (b) Solve, using matrix algebra, the system of equations from Question 1 to find the amounts invested in each type of bond.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider the following two banks: Bank 1 has assets composed solely of a 10-year, 11.00 percent coupon, $1.6 million loan with a 11.00 percent yield to maturity. It is financed with a 10-year, 10 percent coupon, $1.6 million CD with a 10 percent yield to maturity. Bank 2 has assets composed solely of a 7-year, 11.00 percent, zero-coupon bond with a current value of $1,133,012.90 and a maturity value of $2,352,316.24. It is financed by a 10-year, 5.25 percent coupon, $1,600,000 face value CD with a yield to maturity of 10 percent. All securities except the zero-coupon bond pay interest annually. a. If interest rates rise by 1 percent (100 basis points), what is the difference in the value of the assets and liabilities of each bank? (Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter the answers in dollars, not millions of dollars. Round your answers to 2 decimal places. (e.g., 32.16)) Before Interest Rise Asset Value After Interest Rise…
In 1994, you purchased a, $1,000 corporate bond issued by Boeing. At the time, the interest rate for the bond was 9.50 percent. Today, comparable bonds are paying 5.25 percent. What is the approximate dollar price for which you could sell your Boeing bond?
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