Registered educational savings plan

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A zero coupon bond

A 5% coupon bond

An 8% coupon bond

Suppose you are Investing money in an RESP (Registered Educational Savings Plan) to meet your child’s post-secondary schooling expenses. You expect you will have to pay out $20,000 per year for 4 years starting 9 years from now. We will just consider the first year’s obligation of $2,000.  You have available the three bonds described in above.

a. Calculate the current price and duration of each bond.

b. Calculate the shares of Bonds 1 and 3 in an optimal immunized portfolio.

Reference no: EM131928592

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