Exhibit 19.8
Use the Information Below for the Following Problem(S)
Consider two bonds, both pay annual interest. Bond C has a coupon of 6% per year, maturity of 5 years, yield to maturity of 6% per year, and a face value of $1000. Bond D has a coupon of 8% per year, maturity of 15 years, yield to maturity of 6% per year, and a face value of $1000.
-Refer to Exhibit 19.8.Assume that your investment horizon is 6 years and your portfolio consists only of Bond C and Bond D.Indicate the proportions invested in each bond,so that the portfolio is immunized.

Question

Quizplus · Accepted Answer

6 = X(4.22)+ (1 - X)(9.2)
X = 64.25% or 64% in Bond C
36% in Bond D

Exhibit 19.8 Use the Information Below for the Following Problem(S)