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7 (d) -6.65% Question 93 - 100: Consider an investor that needs to cover a liability of $1,000 in two years from now. He can invest into (i) a one year pure discount bond and (ii) a three year pure discount bond both having a face value $100. Assume that the yield to maturity is 10%. How many units of the three year pure discount bond does the investor need to purchase to be able to cover the liability of $1,000 for sure even if the yield to maturity changes in the second year? (a) 10 ? (b) 5.5 ? (c) 4.13 (d) 0.5

          7
(d) -6.65%
Question 93 - 100: Consider an investor that needs to cover a liability of $1,000 in two
years from now. He can invest into (i) a one year pure discount bond and (ii) a three year
pure discount bond both having a face value $100. Assume that the yield to maturity is 10%.
How many units of the three year pure discount bond does the investor need to purchase to
be able to cover the liability of $1,000 for sure even if the yield to maturity changes in the
second year?
(a) 10
? (b) 5.5
? (c) 4.13
(d) 0.5

7
(d) -6.65%
Question 93 - 100: Consider an investor that needs to cover a liability of 1,000 in two
years from now. He can invest into (i) a one year pure discount bond and (ii) a three year
pure discount bond both having a face value100. Assume that the yield to maturity is 10%.
How many units of the three year pure discount bond does the investor need to purchase to
be able to cover the liability of 1,000 for sure even if the yield to maturity changes in the
second year?
(a) 10
? (b) 5.5
? (c) 4.13
(d) 0.5

Added by Bryan M.

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