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How much do you need to invest in each bond

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Reference no: EM132491839

Your client has just made a $50,000 deposit into a 4-year GIC earning 4% per year. All of the earnings on the GIC are paid at maturity (there are no cash flows between the time of the deposit and the maturity date). You want to immunize your portfolio to ensure that you will have enough money to meet your obligation. Your investment options are a 3-year zero coupon bond and a 6-year bond paying 4% annual coupons. Both bonds have 4% yield to maturity. How much do you need to invest in each bond to immunize your portfolio to ensure you meet your obligation?

Reference no: EM132491839

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