Question
A company must make payments of $10 annually in the form of a 10- year annuity- immediate. It plans to buy two zero coupon bonds
A company must make payments of $10 annually in the form of a 10- year annuity- immediate. It plans to buy two zero coupon bonds to fund these payments. The first bond matures in 2 years and the second bond matures in 9 years, and both are purchased to yield 10% effective. What face amount of each bond should the company buy in order to be immunized from small changes in the interest rate (redington immunization)?
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Auditing Theory And Practice
Authors: Jerry R. Strawser, Robert H. Strawser, Roger H. Hermanson
9th Edition
0873939336, 9780873939331
