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1. Suppose liabilities of $1,000 are due to be paid at the end of years 2, 3, and 7. Asset cashflows consist A1 in 1

1. Suppose liabilities of $1,000 are due to be paid at the end of years 2, 3, and 7. Asset cashflows consist A1 in 1 year and A6 in 6 years. The yield for all payments is 5%. You are going to try and immunize the liability by meeting the conditions for immunization.

a. Find A1 and A6 .

b. Verify that the conditions for immunization are met.

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