Question
An insurance company must make payments to a customer of $20 million one year and $8 million in five years. The yield curve is flat
An insurance company must make payments to a customer of $20 million one year and $8 million in five years. The yield curve is flat at 16%. A. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon, 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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Authors: Zvi Bodie, Alex Kane, Alan J. Marcus
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