As corporate treasurer, you have to pay $20 million in one year and again in two years. Bonds of all maturities currently yield 8%.

Please answer the following questions

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 9%, what is your immediate funding surplus (positive number) or shortfall (negative number) (in $)? Use the exact duration, not the rounded one shown as solution to part 1.
4. If interest rates suddenly go down to 7%, what is your immediate funding surplus (positive number) or shortfall (negative number) (in $)? Use the exact duration, not the rounded one shown as solution to part 1.