Your cousin Vinny is attempting to sell you his bond portfolio to pay off some of his gambling debts. Guido has informed Vinny that he needs the money by the end of the day or he is history. Vinny proposes to sell you his portfolio at a smoking price of $90,000. Vinny's bond portfolio includes 80 bonds with a $1,000 face value and a coupon rate of 6.9%. These bonds have 9 years to maturity and pay coupons on a semiannual basis. The YTM of these bonds is 7.2%. Vinny's bond portfolio also includes 50 zero coupon bonds with a $1,000 face value and 13 years to maturity. The YTM on these bonds is 7.8% (use semiannual compounding). How good of a deal is Vinny offering you for his bond portfolio? Clearly show your reasoning here with supporting calculations. 

Answer rating: 100% (QA)

To determine how good of a deal Vinny is offering for his bond portfolio we need to calculate the present value of the cash flows from the bonds and c... View the full answer