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7.2.5 A liability of 1 is due at time 10. An attempt is made to fully immunize this liability at io =.10 using two zero coupon bonds of amounts A, and A₁₂ due at times t₁ and t2, respectively. In each of the following cases, solve for the two missing quantities out of A, A,,,, given the other two. (a) t₁ =5, t2=15 (b) (i) t₁ =5, A₁₁ = .40 (ii) t₁ =5, A₁₁ =.70 (no solution for t₂ ≥10)

7.2.5 A liability of 1 is due at time 10. An attempt is made to fully immunize this liability at io =.10 using two zero coupon bonds of amounts A, and A₁₂ due at times t₁ and t2, respectively. In each of the following cases, solve for the two missing quantities out of A, A,,,, given the other two. (a) t₁ =5, t2=15 (b) (i) t₁ =5, A₁₁ = .40 (ii) t₁ =5, A₁₁ =.70 (no solution for t₂ ≥10)

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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7.2.5 A liability of 1 is due at time 10. An attempt is made to fully immunize this liability at io =.10 using two zero coupon bonds of amounts A, and A₁₂ due at times t₁ and t2, respectively. In each of the following cases, solve for the two missing quantities out of A, A,,,, given the other two. (a) t₁ =5, t2=15 (b) (i) t₁ =5, A₁₁ = .40 (ii) t₁ =5, A₁₁ =.70 (no solution for t₂ ≥10)
Transcribed Image Text:7.2.5 A liability of 1 is due at time 10. An attempt is made to fully immunize this liability at io =.10 using two zero coupon bonds of amounts A, and A₁₂ due at times t₁ and t2, respectively. In each of the following cases, solve for the two missing quantities out of A, A,,,, given the other two. (a) t₁ =5, t2=15 (b) (i) t₁ =5, A₁₁ = .40 (ii) t₁ =5, A₁₁ =.70 (no solution for t₂ ≥10)
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