You are a bond portfolio manager and have $3 million that you will invest for 3 years. You have an obligation due in 3 years and you want to immunize your portfolio against interest rate risk over this horizon. You use the $3 million to invest in two zero coupon bonds: a 4 year bond and a 1 year bond. How much money should you invest in the 4 year bond? A) $0 B) $0.8 million C) $1 million D) $2 million E) $3 million
You are a bond portfolio manager and have $3 million that you will invest for 3 years. You have an obligation due in 3 years and you want to immunize your portfolio against interest rate risk over this horizon. You use the $3 million to invest in two zero coupon bonds: a 4 year bond and a 1 year bond. How much money should you invest in the 4 year bond? A) $0 B) $0.8 million C) $1 million D) $2 million E) $3 million
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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Question
You are a bond
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A) $0
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B) $0.8 million
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C) $1 million
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D) $2 million
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E) $3 million
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