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Lifeco Insurance Company needs to have $100 million 5 years from today to satisfy life insurance claims. Lifeco purchases 8 percent coupon bonds selling at
Lifeco Insurance Company needs to have $100 million 5 years from today to satisfy life insurance claims. Lifeco purchases 8 percent coupon bonds selling at par with a maturity of 6.2 years. Assume immediately after the purchase, an interest rate shock causes bond yields to jump up to 10%. a. Immediately after the price shock, suppose Lifeco Insurance Company can purchase bonds selling at par that offer a 10 percent coupon. What will the maturity of these bonds be? (Round to 2 decimal places)
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