An insurance company must make payments to a customer of $8 million in 1 year and $4 million in 4 years. The yield curve is flat at 9%. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? (Do not "round intermediate calculations. Round your answer to 4 decimal places.) Maturity of zero coupon bond years What must be the face value and market value of that zero-coupon bond? (Do not round intermediate calculations. Enter your answers in millions b. rounded to 2 decimal places. Omit the "S" sign in your response.) Face value Market values
An insurance company must make payments to a customer of $8 million in 1 year and $4 million in 4 years. The yield curve is flat at 9%. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? (Do not "round intermediate calculations. Round your answer to 4 decimal places.) Maturity of zero coupon bond years What must be the face value and market value of that zero-coupon bond? (Do not round intermediate calculations. Enter your answers in millions b. rounded to 2 decimal places. Omit the "S" sign in your response.) Face value Market values
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
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Transcribed Image Text:An insurance company must make payments to a customer of $8 million in 1 year and $4 million in 4 years. The yield curve is flat at 9%.
If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? (Do not
round intermediate calculations. Round your answer to 4 decimal places.)
a.
Maturity of zero coupon bond years
What must be the face value and market value of that zero-coupon bond? (Do not round intermediate calculations. Enter your answers in millions
b.
rounded to 2 decimal places. Omit the "$" sign in your response.)
Face valueS
Market values
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