In 10 years, a $200,000,000 liability is due. Only one bond is available to you: ABC company, 10 years semiannual payments, 4% YTM, 8% coupon, 3% reinvestment rate, BBB credit rating.

a. Provide the # of bonds needed to fund the liability and the cost.

b. If the reinvestment rate falls from 3% to 2%, what is the projected deficit?

c. To prevent a deficit, explain how immunization can work, how it can help you and what conditions are required.