Question

possible answers are 900, 908, 912, 916 , 904

3. The Canadian government anticipates making the following pension payments (in billions): End of Year Payment 2013 150 2014 160 2015 170 On 12/31/2011, the Canadian government purchases zero coupon bonds from the US government to match exactly the pension payments it anticipates making. The cost of the purchase is 436.106 billion. The price of the zero coupon bonds per 1,000 on 12/31/2011 is as follows: Term Price : 972.76 942.60 874.82 841.97 Calculate X.

Answer 1

Year of Purchase		2011
Requirement In years		2013	2014	2015
Time left in Years from 2011		2	3	4
Term or time left	Price Given In question	Required Amt (Billion)	No of Coupon Required	Amount in billion
A	B	C	D=C*10^9/1000	E=DXB/10^9
2	942.60	150	150000000	141.39
3	X	160	160000000
4	874.82	170	170000000	148.72
Total Fund used	P			290.11
Fund Available	Q			436.11
Balance	R=P-Q			146.00
Price per Bond	T=R*10^9/coupon required ie 16000000			912.48
Price = 912.48 or 912