2. You consider immunizing against the liability by investing in 66,075.54 bonds of Type D. This portfolio has a present value, today, equal to the present value of the liability. If the yield curve increases to 7.9%, what is the new present value of this immunizing portfolio? Why?

A. 4,813,754.96

B. 4,806,248.87

C. 4,544,469.09

D. 4,531,608.71

E. None of the above

3. If the yield curve shifts to 7.9% and you hold 66,075.54 bonds of Type D for the next 10 years, what is the value at t=10 (i.e. the liability due date) of this portfolio? why?

A. 10,296,708.70

B. 10,280,653.02

C. 9,693,192.78

D. 9,720,701.36

E. None of the above

6. It can be shown that the solution to the above immunization problem is to invest in: 22,650.14 Bonds of Type B and 30,528.78 Bonds of Type D. What is the modified duration of this portfolio?Why?

A. 8.520

B. 9.108

C. 9.355

D. 10.00

E. None of the above