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A company has liabilities of 6,000 and 3,000 due at the end of years one and three respectively. The investments available to the company are
A company has liabilities of 6,000 and 3,000 due at the end of years one and three respectively. The investments available to the company are the following two zero-coupon bonds: Maturity (Years) Effective Annual Rate Par 1 4.8% 1,000 3 5.6% 1,000 Determine the total cost of the bonds required to exactly match these liabilities, and the overall yield rate of the bond purchase.
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