Liability payments consist of 1000 at the end of year one, 2000 at the end of year two, and 3000 at the end of year three. An attempt it made at interest rate i0 = 0.10 to arrange assets so as to match liabilities with asset cashflows. Consider the following three separate cases of possible assetcashflows:(a) a single payment at time 1,(b) an asset payment at time 0 and asset payment at time 2,(c) an asset payment at time 0 and asset payment at time 4,In each case, determine the asset payment amount(s) and whether or not the assets immunize theliabilities. Show your work.

Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
Question

 Liability payments consist of 1000 at the end of year one, 2000 at the end of year two, and 3000 at the end of year three. An attempt it made at interest rate i0 = 0.10 to arrange assets so as to match liabilities with asset cashflows. Consider the following three separate cases of possible asset
cashflows:
(a) a single payment at time 1,
(b) an asset payment at time 0 and asset payment at time 2,
(c) an asset payment at time 0 and asset payment at time 4,
In each case, determine the asset payment amount(s) and whether or not the assets immunize the
liabilities. Show your work.

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