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You need a payout of $550,000 in 5 years. You find this semi-annual bond available...

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Finance

You need a payout of $550,000 in 5 years. You find this semi-annual bond available for purchase:

PV $941.34 FV $1000.00 YTM 8.00% Coupon 6.75% Years to maturity 6 Duration 4.9936

a) How many bonds do you need to purchase today to achieve the $550,000 payout in 5 years? (Show in dollars and bonds. Round to the nearest bond.) (2 make-up points

b) Show that if rates rise to 9% immediately after you purchase the bond that you will still achieve your necessary payout of $550,000. That is, show what you will receive in year 5 from selling and bond and from reinvested coupons.

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