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You have a planning horizon of H = 6 years and with to immunize your investment for that horizon. You attempt to do so by buying a perpetual bond that pays $100 annually and has a YTM of 20% p.a. You will reinvest the coupons throughout this 6-year period and, additionally, you will sell the bond at the end of that 6-year period. Find the total cash flow you will have 6 years from now if interest rates decrease to 19% just after you buy the bond, and then remain at that new level throughout your planning horizon. Give the answer with two decimals; e.g., 1,234.56. As always, do not include the dollar sign in your answer.

Financial Management, Finance

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