Exhibit 19.10 Use the Information Below for the Following Problem(S)

question 72

Multiple Choice

Exhibit 19.10
Use the Information Below for the Following Problem(S)
You are creating a portfolio that consists of the following two bonds. Bond A pays an annual 7% coupon, matures in two years, has a yield to maturity of 8%, and a face value of $1,000. Bond B pays an annual 8% coupon, matures in three years, has a yield to maturity of 9%, and a face value of $1,000.
-Refer to Exhibit 19.10.Assume that your investment horizon is 2 years and your portfolio consists only of bonds A and B.What proportion should be invested in each bond to immunize the portfolio?

• A) Invest 72.4% in bond A and 27.6% in bond B.
• B) Invest 68.3% in bond A and 31.7% in bond B.
• C) Invest 58.5% in bond A and 41.5% in bond B.
• D) Invest 31.7% in bond A and 68.3% in bond B.
• E) Invest 27.6% in bond A and 72.4% in bond B.

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Definitions:

Blood Pressure

The force exerted by circulating blood on the walls of the body's arteries, a critical measure of cardiovascular health.

Immune System

The complex network of cells, tissues, and organs that work together to defend the body against attacks by foreign invaders, such as viruses and bacteria.

Car Accident

An unexpected event involving a vehicle colliding with another vehicle, object, or person, often causing damage or injury.

Express Grief

The act of outwardly showing sorrow or sadness due to a loss, often through crying, talking, or other forms of emotional release.