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A company has liabilities of 406 due at the end of each of the next three years. The company will invest 1090 today to fund
A company has liabilities of 406 due at the end of each of the next three years. The company will invest 1090 today to fund these payouts. The only investments available are one-year and three-year zero-coupon bonds, and the yield curve is flat at 8.5% annual effective rate. The company only wishes to match the duration of its assets to the duration of its liabilities.
Determine how much the company should invest in each bond.
#1 -> for the one-year zero coupon bond
#2-> for the three-year zero coupon bond
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