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  1. business
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  3. consider a portfolio of two newly issued bonds bot

Consider a portfolio of two newly issued bonds both with a face value of $100,000....

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Accounting

Consider a portfolio of two newly issued bonds both with a face value of $100,000. Bond A: 6% coupon bond paying semi-annual coupons with a maturity of 1.5 years (three coupons to be received), and its current yield is 7% p.a. Bond B: 10% coupon bond paying semi-annual coupons with a maturity of 2 years (four coupons to be received) with the current yield of 8% p.a.

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a) Identify and in the table below, fill in the portfolio's actual cash flows received at the end of each six-month period (from now) out to two years. Cash flows ($) Time (at the end of) 6 months 12 months 18 months 24 months (1 mark) (1 mark) (1 mark) (1 mark) b) Calculate today's price of purchasing a portfolio consisting of one Bond A and one Bond B. (2 marks)

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