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A company is incurring a liability with a present value of $1000, but the company has some flexibility about when the liability will be due.
A company is incurring a liability with a present value of $1000, but the company has some flexibility about when the liability will be due. At the arranged due date some T years from now - the liability will be due in a single payment. Before the due date is decided, the company wants to be sure that assets are available to arrange Redington immunization for the liability. Here are the available assets: Asset Amount available Zero-coupon bond redeeming in 1 year Up to $600 (of present value) Zero-coupon bond redeeming in 5 years Up to $600 (of present value) Find the range of T that would permit Redington immunization using these available assets. A company is incurring a liability with a present value of $1000, but the company has some flexibility about when the liability will be due. At the arranged due date some T years from now - the liability will be due in a single payment. Before the due date is decided, the company wants to be sure that assets are available to arrange Redington immunization for the liability. Here are the available assets: Asset Amount available Zero-coupon bond redeeming in 1 year Up to $600 (of present value) Zero-coupon bond redeeming in 5 years Up to $600 (of present value) Find the range of T that would permit Redington immunization using these available assets
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