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5, (30 points) You are responsible for managing the following liability: 5-year bond, 4% semi annual coupon, when the market interest rate is 6%. a.
5, (30 points) You are responsible for managing the following liability: 5-year bond, 4% semi annual coupon, when the market interest rate is 6%. a. b. c. What is the present value of this liability? What is the duration of this liability? You want to consider immunizing the liability using 3-year and 6-year zero-coupon bonds. i. What are the investment weights needed for the two bonds? ii. What are the present values of the two bonds needed to immunize the liability? What are the face values of the two bonds needed to immunize the liability? Build a sensitivity table showing the results of changes in interest rates, with the following format iii. iv
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