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A company must pay liabilities of 3000 and 5000 at the end of years 2 and 4, respectively. The only investments available to the company
A company must pay liabilities of 3000 and 5000 at the end of years 2 and 4, respectively. The only investments available to the company are thre following two zero - coupons bonds : 1) maturity 2 years, effective annual yield 5.5%, par 1000. 2) maturity 4 years, effective annual yield 6.8%, par 100. Find the cost of exactly matching those liabilities.
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