USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)

question 73

Multiple Choice

USE THE INFORMATION BELOW FOR THE FOLLOWING PROBLEM(S)
Consider two bonds: both pay annual interest. Bond Y has a coupon of 6 percent per year, maturity of five years, yield to maturity of 6 percent per year, and a face value of $1000. Bond X has a coupon of 7 percent per year, maturity of 10 years, yield to maturity of 4 percent per year, and a face value of $1000.
-Refer to Exhibit 13.13. Assume that your investment horizon is five 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 percent in Bond Y and 50 percent in Bond X
• B) 76 percent in Bond Y and 24 percent in Bond X
• C) 36 percent in Bond Y and 64 percent in Bond X
• D) 100 percent in Bond X
• E) 100 percent in Bond Y

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Definitions:

Somatic Symptom Disorder

A mental disorder characterized by an excessive focus on physical symptoms — like pain or fatigue — that causes significant emotional distress and problems functioning.

Type A

Refers to a personality type characterized by high competitiveness, self-imposed stress, and a sense of urgency.

Type B

A personality type characterized by a relaxed, less competitive approach and lower levels of stress.

Health Effects

The alterations in health or disease status resulting from exposure to a particular agent, lifestyle, or environmental condition.