ICD is considering investing in a 3 year fixed rate investment-grade corporate bond with a coupon rate of 6% but coupon paid semi-annually. The current market rate (current yield) is 7% . The Board wants you to calculate the fair value of this bond which pays interest semiannually (in this case, the bond will make 6 semi-annual payments). The par value is AED1000. 

The post-covid19 economy, will you recommend investing in this bond? You answer should take into consideration governments post-covid19 policies with regard to money supply and interest rates?

 

ICD has taken a liability that will mature in 5 years. The liability has an interest rate of 10% and the present value it is AED 100,000. ICD is worried about the interest rate volatility and wants to immunize this liability with a combination of assets. The Board wants you to suggest a strategy. 

Logically explain how you would immunize the ICD's liability. Show your logic by using numbers and calculations?