An investor needs exactly 1 lakh after 2 years and has 2 bonds in mind with YTM of 10%. Bond A has an annual coupon of 7%, maturing in 4 years and is priced at 904.90. Bond 3 has an annual coupon of 6%, maturing in one year and is priced at 963.64. How many bonds of each should he buy?

An investor needs exactly 1 lakh after 2 years and has 2 bonds in mind with YTM of 10%. Bond A has an annual coupon of 7%, maturing in 4 years and is priced at 904.90. Bond 3 has an annual coupon of 6%, maturing in one year and is priced at 963.64. How many bonds of each should he buy?

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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An investor needs exactly `1 lakh after 2 years and has 2 bonds in mind with YTM of 10%. Bond A has an annual coupon of 7%, maturing in 4 years and is priced at 904.90. Bond
B has an annual coupon of 6%, maturing in one year and is priced at 963.64. How many bonds of each should he buy?

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