Question
Ash Investment Company manages a broad portfolio with this composition:
|
Par Value
|
Present
Market Value
|
Years Remaining
to Maturity
|
|
Zero-coupon bonds
|
200,000,000
|
63,720,000
|
12
|
|
8% Treasury bonds
|
300,000,000
|
290,000,000
|
8
|
|
11% corporate bonds
|
500,000,000
|
380,000,000
|
10
|
|
|
733,720,000
|
|
Ash expects that in four years, investors in the market will require an 8 percent return on the zero-coupon bonds, a 7 percent return on the Treasury bonds, and a 9 percent return on corporate bonds.
Estimate the market value of the bond portfolio four years from now.