Question: Client #2 Unlike the previous client who just left your office, Ms. Park - a wealthy politician - is very clear on the fixed- income

Client #2 Unlike the previous client who just
Client #2 Unlike the previous client who just left your office, Ms. Park - a wealthy politician - is very clear on the fixed- income securities she wants to invest. However, she is worried about over-paying for them. Specifically, Ms. Park is interested in acquiring the following two fixed-income contracts. A risk-free zero-coupon bond with a maturity of 3 years and a par value of $100; and, The right to invest $100 at the end of the year and receive $105.6 two years after the initial investment. 2.1. Exploit (all) the information acquired as a financial advisor in addition to the transaction prices showed in Table 1, to advise Ms. Park on how much she should be willing to pay today for the contracts described above. (30%) Table 1: Risk-free bonds' transaction information (par value of $100) Bond Price Coupon Maturity Coupon YTM Rate (Year) Freq. A 0% Annual 4.00% N E B 101.01 5% Annual

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