An Institutional Investor Will Have to Pay Off a Maturing

question 49

Multiple Choice

An institutional investor will have to pay off a maturing bond issue in 3 years. The institution has 10 000 bonds outstanding each with a $1 000 par value. The institutional money manager is re-evaluating the fund's $100 million portfolio at this time. She is bullish on shares and wants to put the most she can into the share market but she cannot risk not being able to pay off the bonds. Three year zero coupon bonds are available paying 6% interest. What percentage of the total $100 million portfolio can she put in shares and still ensure meeting the bond payments?

• A)87.4%
• B)88.5%
• C)90.0%
• D)91.6%

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