Today is 16 December 2021. A pension fund has a $50 million obligation due exactly 7...
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Today is 16 December 2021. A pension fund has a $50 million obligation due exactly 7 years from now and pays 3% interest (compounded annually) on this obligation. Assume that the term structure is flat. How many AAPL and MSFT bonds should the pension fund buy to form a portfolio that will ensure that the pension fund will meet its obligation in 7 years' time? AAPL bond has a modified duration of 19.85 and MSFT bond has a modified duration of 3.65. Use the information provided in the table below. Note that the quoted price is the clean price. Price ($) Yield (%) Par value ($) Modified duration (%) Last coupon date Coupon frequency Day count principle Maturity MSFT 1065.597 3 1,000 3.65 03 May 2021 annually 30/360 03 May 2025 AAPL 967.606 3 1,000 19.85 08 Aug 2021 annually 30/360 08 Aug 2050 Today is 16 December 2021. A pension fund has a $50 million obligation due exactly 7 years from now and pays 3% interest (compounded annually) on this obligation. Assume that the term structure is flat. How many AAPL and MSFT bonds should the pension fund buy to form a portfolio that will ensure that the pension fund will meet its obligation in 7 years' time? AAPL bond has a modified duration of 19.85 and MSFT bond has a modified duration of 3.65. Use the information provided in the table below. Note that the quoted price is the clean price. Price ($) Yield (%) Par value ($) Modified duration (%) Last coupon date Coupon frequency Day count principle Maturity MSFT 1065.597 3 1,000 3.65 03 May 2021 annually 30/360 03 May 2025 AAPL 967.606 3 1,000 19.85 08 Aug 2021 annually 30/360 08 Aug 2050
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Related Book For
Principles of Corporate Finance
ISBN: 978-1260013900
13th edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen
Posted Date:
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