Determine the coupon rate of bond

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Reference no: EM13925514

Dave needs to pay $1000 at the end of each year for the next 3 years. He purchased 3 different annual coupon bonds to match the liabilities exactly. The bonds have the following properties: Bond Time to Maturity Coupon Rate A 1 0.04 B 2 X C 3 0.05 All three bonds have a par value of $1,000 and can be redeemed at par. Dave purchased 0.9 of Bond A. Determine the coupon rate of Bond B to match the cash flows of the bonds to the cash flows of the liabilities. Assume fractional bond purchases are allowed.

Reference no: EM13925514

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