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

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

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
В 3 308, 160
92, 456,
B =

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