As corporate treasurer, you have to pay $19 million in one year and again in two years. Bonds of all maturities currently yield 9%.

1. What is the duration of the liability?

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 $)?

3.If interest rates suddenly go up to 10%, what is your immediate funding surplus (positive number) or shortfall (negative number) (in $)?

4.If interest rates suddenly go down to 8%, what is your immediate funding surplus (positive number) or shortfall (negative number) (in $)?