Exhibit 19.9 Use the Information Below for the Following Problem(S)

question 15

Multiple Choice

Exhibit 19.9
Use the Information Below for the Following Problem(S)
Consider two bonds, both pay annual interest. Bond Y has a coupon of 6% per year, maturity of 5 years, yield to maturity of 6% per year, and a face value of $1000. Bond X has a coupon of 7% per year, maturity of 10 years, yield to maturity of 4% per year, and a face value of $1000.
-Refer to Exhibit 19.9.Assume that your investment horizon is 5 years and your portfolio consists only of Bond Y and Bond X.Indicate the proportions invested in each bond,so that the portfolio is immunized.

• A) 50% in Bond Y and 50% in Bond X
• B) 76% in Bond Y and 24% in Bond X
• C) 36% in Bond Y and 64% in Bond X
• D) 100% in Bond X
• E) 100% in Bond Y

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Definitions:

Accounts Receivable

Money owed to a business by its clients or customers for goods or services delivered but not yet paid for, typically recorded on the balance sheet.

Perpetual Inventory System

An approach in inventory accounting that employs computerized point-of-sale systems and enterprise asset management software to instantaneously record the purchase or sale of inventory items.

Credit To Inventory

An accounting entry that increases the inventory account, reflecting the addition of goods or the correction of an underreported inventory balance.

Credit Period

The amount of time the buyer is allowed in which to pay the seller.