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7. You need to pay liabilities of 1000 at the end of year 1 and X at the end of year 2. The only investments
7. You need to pay liabilities of 1000 at the end of year 1 and X at the end of year 2. The only investments available are: i) One-year zero-coupon bonds with an annual effective yield of 5% ii) Two-year bonds with a par value of 1000 and 8% annual coupons, with an annual effective yield of 6%. You plan an exact cash flow matching strategy for these liabilities. For a total price of 1500. Calculate the amount invested in the one-year zero-coupon bonds. (A) 909 (B) 921 (C) 933 (D) 945 (E) 954
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