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Suppose that the one-year discount factor falls to 0.94106, the three-year discount factor declines to 0.89848 and the five-year discount factor falls to 0.857204. Calculate
Suppose that the one-year discount factor falls to 0.94106, the three-year discount factor declines to 0.89848 and the five-year discount factor falls to 0.857204. Calculate the portfolio's value of 1-year, 3-year and 5-year bonds before and after the change in interest rates and explain why the immunisation is not perfect. (Ignore rounding errors).
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