1 Suppose your firm has the following liability schedule and the term structure is flat at 3 (EAR) Year Liability (in $B) 5 30 10 30 a What is the PV of the liabilities b How does the value of the liability change if rates fall to 2 9 c If you wanted to fund the liability by purchasing a single maturity of zero coupon bond, what maturity would you choose and how much would you pay d Suppose that the liability is currently only funded with $40B in assets What do you recommend to do due to the amount of the underfunding increasing due to rates changing

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1  Suppose your firm has the following liability schedule and the term structure is flat at 3  (EAR)  Year Liability (in $B) 5 30 10 30 a  What is the PV of the liabilities  b  How does the value of the liability change if rates fall to 2 9   c  If you wanted to fund the liability by purchasing a single maturity of zero coupon bond, what maturity would you choose and how much would you pay  d  Suppose that the liability is currently only funded with $40B in assets  What do you recommend to do due to the amount of the underfunding increasing due to rates changing

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1. Suppose your firm has the following liability schedule and the term structure is flat at 3% (EAR). Year Liability (in $B) 5 30 10

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