BULLET IMMUNIZATION. FOR THIS AND THE NEXT TWO QUESTIONS. A portfolio manager wishes to invest $9,734 in bonds and desires to earn 4.2% over the next 4.5 years. The FV of this investment, which is $11,714, will be used to meet a payment obligation at that time. To immunize the investment, the manager can invest in a $10,000 face value bond currently selling for $9,734 with a coupon rate of 3.6% and 5 years to maturity. This bond's duration is 4.5 years. Assume the reinvestment rate will remain at 4.2% but only until end of Year 3, afterwards it is expected to fall to 4% in years 4 and 5. Calculate total interest received over the next 4.5 years. Hint. Please design a simple spreadsheet such as the one shown in the video on Bullet Immunization. Be aware that the last investment period is only half a year. Therefore use one half of YTM in Year 4.5 for compounding. The following table is a guide:

	YEAR
	1	2	3	4	4.5
Reinvestment rate:
Coupon pmt received

Question 16 options:

1)

$1,742

2)

$9,980

3)

$11,722

4)

$11,714

5)	None of the above

Question 17 (1 point)

Calculate the value of this bond in Year 4.5, that is, half a year prior to maturity.

Question 17 options:

1)

$1,742

2)

$9,980

3)

$11,722

4)

$11,714

5)	None of the above

Question 18 (1 point)

If the portfolio manager invests in this bond, will the bullet immunization strategy be successful?

Question 18 options:

1)	Yes, total portfolio value in Year 4.5 is approximately $10,000

2)	Yes, total portfolio value in Year 4.5 is approximately $9,980

3)	Yes, total portfolio value in Year 4.5 is approximately $11,722

4)	Yes, total portfolio value in Year 4.5 is approximately $11,714

5)	None of the above

there are 3 questions but related to each other, hope you understand, thank you.