Exhibit 19.10 Use the Information Below for the Following Problem(S)

Exhibit 19.10
Use the Information Below for the Following Problem(S)
You are creating a portfolio that consists of the following two bonds. Bond A pays an annual 7% coupon, matures in two years, has a yield to maturity of 8%, and a face value of $1,000. Bond B pays an annual 8% coupon, matures in three years, has a yield to maturity of 9%, and a face value of $1,000.
-Refer to Exhibit 19.10.Assume that your investment horizon is 2 years and your portfolio consists only of bonds A and B.What proportion should be invested in each bond to immunize the portfolio?

A) Invest 72.4% in bond A and 27.6% in bond B.
B) Invest 68.3% in bond A and 31.7% in bond B.
C) Invest 58.5% in bond A and 41.5% in bond B.
D) Invest 31.7% in bond A and 68.3% in bond B.
E) Invest 27.6% in bond A and 72.4% in bond B.