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Suppose that your firms liability is approximately: Year Liability (in $B) and the term structure is flat at 3% (EAR). a. What is PV of

Suppose that your firms liability is approximately: Year Liability (in $B) and the term structure is flat at 3% (EAR).

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a. What is PV of the liabilities?

b. How does the value of the liability change if rates fall to 2.9%?

Year Liability (in $B) 5 1 10 2 20 3

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