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ANSWER ALL 6. A company has an obligation to pay $100,000 in 5 years. The company invests the present value of the obligation in a
ANSWER ALL
6. A company has an obligation to pay $100,000 in 5 years. The company invests the present value of the obligation in a 3-year and a 10-year zero coupon bond to immunize its position. We assume that there is a fiat yield curve and that assets and liabilities are valued at an annual effective rate of 6% (1) (10 pts) Calculate the amount invested in the 3-year bond and the 10-year bond, respectively. (2) (10 pts) Is it a fully immunized position? Why Step by Step Solution
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