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34. You have liabilities that require a payment of 5,000 due in 3 years and another payment of 5,000 due in 5 years. You intend
34. You have liabilities that require a payment of 5,000 due in 3 years and another payment of 5,000 due in 5 years. You intend to purchase zero-coupon bonds to create an immunized portfolio in support of these liabilities. The zero-coupon bonds available to you are a 2-year bond and an 8-year bond, each of which is available for any face amount that you desire. (Note: You are not attempting to create an exact match" of the asset and liability cash flows.) Assume that an annual effective interest rate of 6% applies to each of the assets and liabilities, and that you purchase bonds such that the assets have the same present value and modified duration as the liabilities. What is the total maturity value of the bonds that are purchased (to the nearest 100)? A) 9,800 B) 9,900 C) 10,000 D) 10,100 E) 10,200
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