Suppose in 2017 an insurer has to make a guaranteed payment to a policyholder in five years, 2022. Assume this target guaranteed payment is $1,469. To immunize itself against interest rate risk, the insurer needs to determine which investments would produce a cash flow of exactly $1,469 in five years regardless of future fluctuation of interest rate. Suppose the market interest rate is 8%. If the insurer has two options: 1) a five-year discount bond, and 2) a six-year coupon bonds with 8% annual coupon payment.

1. Can the insurer immunize with either of the two options?

2. How many shares the insurer needs to pay to immunize if an option works?