27. An insurance company must make payments to a customer of $1 million in one year and $400,000 in four years. The yield curve is flat at 10%. Use annual compounding. If the company wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what must be the face value of the zero-coupon bond?

Select one:

a. $1.39 million

b. $18.37 million

c. $13.81 million

d. $1.83 million

26. An insurance company must make payments to a customer of $1 million in one year and $400,000 in four years. The yield curve is flat at 10%. Use annual compounding. If the company wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what must be the market value of the zero-coupon bond?

Select one:

a. $1.18 million

b. $2.35 million

c. $5.78 million

d. $11.57 million

25. An insurance company must make payments to a customer of $1 million in one year and $400,000 in four years. The yield curve is flat at 10%. Use annual compounding. If the company wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase?

Select one:

a. $1.96

b. $2.37

c. $1.69

d. $2.86