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- Liability payments of 200,000 each are due in 3 and 5 years from now. You can buy A of a 1-year zero coupon bond andB of a five-year zero coupon bond, both at a yield of 4%. Find A and B if the bond cash-flow is to immunize the liability cash-flow. Answer: A-92, 456, B- 308, 160

- Liability payments of 200,000 each are due in 3 and 5 years from now. You can buy A of a 1-year zero coupon bond andB of a five-year zero coupon bond, both at a yield of 4%. Find A and B if the bond cash-flow is to immunize the liability cash-flow. Answer: A-92, 456, B- 308, 160

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. Liability payments of 200,000 each are due in 3 and 5 years from now. You can buy A of a 1-year zero coupon bond and B of a five-year zero coupon bond, both at a yield of 4%. Find A and B if the bond cash-flow is to immunize the liability cash-flow. Answer: A - 92, 456, B- 308, 160
Transcribed Image Text:7. Liability payments of 200,000 each are due in 3 and 5 years from now. You can buy A of a 1-year zero coupon bond and B of a five-year zero coupon bond, both at a yield of 4%. Find A and B if the bond cash-flow is to immunize the liability cash-flow. Answer: A - 92, 456, B- 308, 160
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