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FinanceQ&A LibraryYield to maturity (Expected/Current)9% Number of Years to Future Liability9.00 Future Liability$7,500 Bond 1Bond 2Bond 3Coupon rate6.00%7.000%8.00%Maturity121824Face value1,0001,0001,000Compute the amount to be invested to meet the future liability noted in the data. This future liability is due in 9 years. Please show work using excelQuestion

Asked Dec 3, 2019

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Yield to maturity (Expected/Current) | 9% | ||

Number of Years to Future Liability | 9.00 | ||

Future Liability | $7,500 | ||

Bond 1 | Bond 2 | Bond 3 | |

Coupon rate | 6.00% | 7.000% | 8.00% |

Maturity | 12 | 18 | 24 |

Face value | 1,000 | 1,000 | 1,000 |

Compute the amount to be invested to meet the future liability noted in the data. This future liability is due in 9 years. Please show work using excel

Step 1

We need to use the concept of time value of money to solve the question. According to the concept of time value of money, the worth of money at the present time is more compared to the identical sum at some time in future, that is, we can earn interest on the money we have at the present time.

Step 2

Given that the future liability is $7,500

Number of years or time period is 9 years

Interest rate (refers to the yield to maturity) is 9% , and we will take the annual payments as zero to calculate the present value in this case.

Step 3

We can determine the present valu...

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