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A company must pay liabilities of $1000 due one year from now and another $2000 due two years from now. There are two available investments,

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A company must pay liabilities of $1000 due one year from now and another $2000 due two years from now. There are two available investments, a one-year zero coupon bond and two- year bonds with 10% annual coupons maturing at Par. The one-year spot rate is 8% and the 4. forward rate for year 2 is 9%. If the liabilities are matched exactly, with bonds (assets), what is the Par value of each bond (the one-year zero coupon bond and the two-year bond with annual 10% coupons)? What is the total cost for the bonds from part a?" a. b

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