7.2.1 Liabilities of 1 each are due at the ends of periods 1 and 2. There are three securities available to produce asset income to cover these liabilities, as follows: (i) A bond due at the end of period 1 with coupon at rate 1% per period, valued at a periodic yield of 14%; (ii) A bond due at the end of period 2 with coupon rate 2% per period, valued at a periodic yield of 15%; (iii)A bond due at the end of period 2 with coupon rate 20% per period, valued at a periodic yield of 14.95%. Determine the cost of the portfolio that exactly matches asset income to liabilities due using (a) bonds (i) and (ii) only. (b) bonds (i) and (iii) only (c) Show that the combination of securities in (b) minimizes the cost of all exact-matching portfolios made up of a combination of the three securities. Note that the minimum cost exact- matching portfolio does not use the highest yielding security in this case