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An insurance company must make payments to a customer of $11 million in one year and $7 million in five years. The yield curve is

An insurance company must make payments to a customer of $11 million in one year and $7 million in five years. The yield curve is flat at 6%.

a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase?

b. What must be the face value and market value of that zero-coupon bond?

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