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Can someone help me with this problem? Attached is an example to help 6.3a#5 Question 5 1 pts A company has a liability of 700
Can someone help me with this problem? Attached is an example to help
6.3a#5
Question 5 1 pts A company has a liability of 700 in 2 year2 and a liability of 1000 in 4 years. To pay for these liabilities, the company purchases a 1-year zero coupon bond and a 5-year zero coupon bond. The company purchases the bonds to ensure duration matching (that is, to satisfy the first two immunization conditions), assuming a market rate of 4%. A company has a liability of 600 in 1 year and a liability of 400 in 5 years. To pay for these liabilities, the company purchases a 2-year zero coupon bond and a 3-year zero coupon bond. The company purchases the bonds to ensure duration matching that is, to satisfy the first two immunization conditions), assuming a market rate of 3%. i) Determine the par value of the 1-year bond. ii) Has Redington immunization been achieved? i) Determine the par value of the 2-year bond. ii) Has Redington immunization been achieved? A) 504: No determine. B) 523; No C) 504; Yes D) 523; Yes E) There is not enough information to 700; No 700: Yes 727; No i) Fz v2 + Fzv7 = 6v + 4vs 1 u) 2F2v3 + 3F3v4 = 6x2 + 2016 F2 - 5.04 F3 = 4.95 727: Yes There is not enough information to determine. w) PA = 6F2v4 + 12 F3 V5 = 78.107 P" - 12 V3 + 120/7 = 108.553 PStep by Step Solution
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