How much will investment be worth after two years

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Reference no: EM132029440

Design an investment of $20000 in a portfolio of duration 2 years consisting of two kinds of coupon bonds maturing after 2 years with annual coupons – bond A pays $20 coupons and $100 face value, bond B pays $5 coupons and $500 face value, given that the initial rate is 8%. How much will this investment be worth after 2 years? Compare this to the future value of $20000 at 8% rate. (We are supposed to find the weights ourselves. I tried to calculate them myself and got wA=-0.0746 & wB=1.0746)

Reference no: EM132029440

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