Money in zero coupon bonds for the next two year

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Reference no: EM131336098

You want to invest your money in zero coupon bonds for the next two years. You find two alternative investments below...Which option would you opt for?

Option 1: Put your money in a 2-year bond with a YTM of 8.995% and par value $1000.

Option 2: Put your money in:

From t=0 till t=1 in a 1 year bond with a YTM of 8% and par value of $1000

From t=1 till t=2, roll the proceeds in another 1 year bond with a YTM of 10% and par value of $1000.

Reference no: EM131336098

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