You attempt to finance a 10-year guaranteed investment contract (GIC). The payment made by policyholder is $100
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You attempt to finance a 10-year guaranteed investment contract (GIC). The payment made by policyholder is $100 million. Suppose the promised annual interest rate of the GIC is 5%. The bond you want to use is a 15-year, 5% annual coupon rate bond (semi- annually paid). Its face value is $100 million and you bought at par. Suppose the new interest rate in the life of GIC stay constantly at 6%. Answer the following questions:
(1). What is the promised payment of the GIC?
(2). Calculate the total return of the investment.
Related Book For
Fundamentals of Investments Valuation and Management
ISBN: 978-0077283292
5th edition
Authors: Bradford D. Jordan, Thomas W. Miller
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