Find the purchase prices for each of these bonds

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Reference no: EM132070615

Gimli must to pay $6000 to Legolas one year from today and $11500 to Arwen two years from today. To match the obligations, Gimli plans to purchase bonds today. The following bonds are available for purchase today:

bullet One-year zero-coupon bonds with 7% yield

bullet Two-year zero coupon bonds with 6.5% annual yield

bullet Two-year 9% par-value bond with annual coupons and 6% annual yield

Gimli purchases the bonds so that the redemption amount of the two-year zero-coupon bond is 5 times the redemption amount of the two-year coupon bond. Find the purchase prices for each of these bonds if Gimli uses the bonds to exactly match the obligations.

One-year zero-coupon bond: $

Two-year zero-coupon bond: $

Two-year coupon bond: $

Reference no: EM132070615

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