d) Calculate the initial rand safety margin.

e) Discuss the main advantage to GMS of using contingent immunization rather than classical immunization.

Use the following information to answer questions d & e. A client of Mashanda. Grace Mugabe Safaris , has entered into a transaction requiring a payment of R90,000,000 in 3 years. Grace Mugabe Safaris (GMS) has R 75,000,000 available to meet this liability. Mashanda recommends a technique called contingent immunization. Under certain market conditions, this technique can provide GMS with a safety margin or cushion in meeting its liability. He notes that an RSA government bond with a bond equivalent yield of 7.5 % is available. GMS agrees to implement contingent immunization using this bond