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A company must pay liabilities of 2000 and 4000 at the end of years 2 and 4, respectively. The only investments available to the company
A company must pay liabilities of 2000 and 4000 at the end of years 2 and 4, respectively. The only investments available to the company are the following two zero-coupon bonds:
Maturity (years) | Eff. annual yield | Par |
2 | 5% | 1,000 |
4 | 6% | 1,000 |
What is the cost of exactly matching those liabilities.
Select one:
a. $4,632.58
b. $4,982.43
c. $4,307.62
d.
$5,228.73
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