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Suppose a company has to pay 100,000 in 3 years and that the annual effective rate of interest is 5%. Zero coupon bonds with terms
Suppose a company has to pay 100,000 in 3 years and that the annual effective rate of interest is 5%. Zero coupon bonds with terms of 1 year and 4 years are available for investment. If the company wishes to achieve Redington Immunization so it buys X 1-year bonds and Y 4-year bonds. What are X and Y? (Check the 3 conditions of Redington Immunization)
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