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A company has liabilities requiring payments of 1,000; 3,000; and 5,000 at the end of years 1, 2 and 3, respectively. The investments available to
A company has liabilities requiring payments of 1,000; 3,000; and 5,000 at the end of years 1, 2 and 3, respectively. The investments available to the company are the following zero-coupon bonds: Maturity (years) 1 2 3 Annual Effective Yield 7% 8% 9% Par 1,000 1,000 1,000 Determine the cost to match these liability cash flows exactly. A) 6,918 B) 7,024 C) 7,165 D) 7,368 E) 7,522
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