Calculate what you expect the future value of the


You are to design for a small pension fund a bond portfolio to fund a $10 million obligation due in 4 years. The fund managers would like to use a 2-year zero along with an 8-year zero to fund the obligation. Currently, the yield curve is flat at around 5% for all maturities. b. Suppose that immediately after you set up the portfolio, the yield curve shifts to 6% at all maturities. Calculate what you expect the future value of the investment in the two bonds to be in year 4.

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Financial Management: Calculate what you expect the future value of the
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