An investor is presented with the following two alternative strategies: (1) Purchase a 5-year bond with an interest rate of 3.85%

An investor is presented with the following two alternative strategies:
(1) Purchase a 5-year bond with an interest rate of 3.85% and hold it until maturity, or (2) purchase a 1-year bond with an interest rate of 4.00% and when it matures, purchase another 1-year bond with an expected rate of 1.75% and when that matures, purchase another 1-year bond with an interest rate of 6.50%. The investor can purchase a fourth 1-year bond with an interest rate of 1.75%. Finally, the investor can buy a fifth (and final) 1-year bond with an interest rate of 2.0%.
Required:
a. What is the expected annual return over 5 years for the first strategy?
b. What is the expected annual return over five years for the second strategy?


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