Given Information:

Liability Maturity $Liability Spot Rate PV of Liability TOTAL PV

1 6 $5,000,000 0.06 $3,524,802.70 $4,993,994.32

2 10 $3,000,000 0.06 $1,469,191.62

The insurance company collected $6,000,000 in insurance premiums against these liabilities. The insurance company is considering to invest in 6-year zero coupons bond and a 10 years zero coupon bond where each has a $1000 face value. Determine the following in the yellow highlighted cells.

CALCULATE CALCULATE

Bond/Maturity Interest Rate # of bonds to buy Bond Value Total $ Investment

6 0.06

10 0.074

Total $ investment= $7.00