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A company owes 500 and 1,000 to be paid at the end of year one and year four, respectively. The company will set up an
A company owes 500 and 1,000 to be paid at the end of year one and year four, respectively. The company will set up an investment program that produces asset cash flows of 75.36 today and 1,413.82 in three years. The annual effective interest rate is 10%. Does this investment program satisfy the three conditions for Redington immunization? (7 points) A liability of 100,000 is due in 5 years. This liability is to be fully immunized at = 10 by means of two zero-coupon bonds, one due in 3 years and the other due in 8 years. What amounts of these two bonds must come due at the two respective dates (3 and 8) to fully immunize this liability? (6 points) A company owes 500 and 1,000 to be paid at the end of year one and year four, respectively. The company will set up an investment program that produces asset cash flows of 75.36 today and 1,413.82 in three years. The annual effective interest rate is 10%. Does this investment program satisfy the three conditions for Redington immunization? (7 points) A liability of 100,000 is due in 5 years. This liability is to be fully immunized at = 10 by means of two zero-coupon bonds, one due in 3 years and the other due in 8 years. What amounts of these two bonds must come due at the two respective dates (3 and 8) to fully immunize this liability? (6 points)
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