As corporate treasurer, you have to pay $16 million in one year and again in two years. Bonds of all maturities currently yield 5%.

Attempt 1/10 for 10 pts.

Part 1

What is the duration of the liability?

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Attempt 1/10 for 10 pts.

Part 2

If you buy zero-coupon bonds with a maturity equal to the duration calculated in the previous part, what should be their combined face value (in $)?

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Attempt 1/10 for 10 pts.