Suppose an investment management fund has the following liabilities for the next four years:

Year	Liability
1	$2 million
2	$12 million
3	$7 million
4	$10 million

a. Construct a dedicated portfolio from 6% coupon bonds with different maturities that will match the liabilities. Assume the applicable yield curve is flat at 6% and coupon payments are annual. Assume you spend the least amount to achieve this cashflow match and minimum denominations are 1000.

b. Show in the table below that the coupon income and maturing principal each year that match the liabilities.

1	2	3	4	5	6
Year	Total bond value outstanding	Coupon income	Maturing principal	Liability	Ending balance (3) + (4) (5)
1
2
3
4