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Alice owes Bob $2200 at the end of one year and is required to set up an investment fund to meet this obligation. Alice must
Alice owes Bob $2200 at the end of one year and is required to set up an investment fund to meet this obligation. Alice must immediately invest (1) an amount x in a money market fund earning 10% currently with rates changing daily, and (2) an amount y in a two-year zero-coupon bond earning 10% to immunize her obligations. Assume the effective interest rate is 10% in all calculations. Determine x and y. Calculate the modified duration of the two assets. 
Alice owes Bob $2200 at the end of one year and is required to set up an investment fund to meet this obligation. Alice must immediately invest (1) an amount x in a money market fund earning 10% currently with rates changing daily, and (2) an amount y in a two-year zero-coupon bond earning 10% to immunize her obligations. Assume the effective interest rate is 10% in all calculations. Determine x and y. Calculate the modified duration of the two assets
Alice owes Bob $2200 at the end of one year and is required to set up an investment fund to meet this obligation. Alice must immediately invest (1) an amount x in a money market fund earning 10% currently with rates changing daily, and (2) an amount y in a two-year zero-coupon bond earning 10% to immunize her obligations. Assume the effective interest rate is 10% in all calculations. Determine x and y. Calculate the modified duration of the two assets.
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International Finance Theory And Policy
Authors: Paul Krugman, Maurice Obstfeld, Marc Melitz
12th Global Edition
1292417005, 978-1292417004
