Yield to maturity in year 0	13%
Obligation of $2,658.44 to be paid out in 8 years
	Bond 1	Bond 2	Bond 3
Coupon rate	12.0%	13.6%	15.5%
Maturity	9	11	25
Face value	1,000	1,000	1,000
Bond price
Face value equal to $1,000 of market value
Duration
Yield to maturity in year 8	13%
	Bond 1	Bond 2	Bond 3
Bond price (in year 8), assume YTM=13%
Value of Reinvested coupons (in year 8)
Total
Multiply by percent of face value bought
Product (Terminal Value)
(c.) Would all three bonds be able to fund the obligation if YTM falls to 9% in year 8. Explain your answer (5 pts)
) Create data table that shows how the bond value for bond 1, 2 and 3 would change with YTM in year 8			Bond 1	Bond 2	Bond 3
		3%
		4%
		5%
		6%
		7%
	YTM (yr8)	8%
		9%
(e) Assume year 8 YTM could be different from 13%.		10%
Which bond is best suited to meet the obligation?		11%
Explain (5 pts)		12%
		13%
		14%
		15%
		16%
		17%
		18%
		19%
		20%

Answer rating: 100% (QA)

c Funding the Obligation at 9 YTM No all three bonds may not be able to fund the obligation if the Y... View the full answer