Multiple Choice
You have a $50 cash flow that is to be received 1.3 years from now. The one-year zero-coupon rate is 6% and the one-and-a-half-year zero-coupon rate is 7%, both in continuously-compounded and annualized terms. If you preserve net present value and duration risk, how would you allocate the cash flow into two equivalent cash flows in the one-year and one-and-a-half-year buckets?
A) 18.23 and 32.01
B) 19.47 and 30.54
C) 19.54 and 30.46
D) 20.00 and 30.00
Correct Answer:
Verified
Correct Answer:
Verified
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