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suppose you buy a zero - coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9 %

suppose you buy a zero

-

coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to

9 % .

What happens to your net position, that is

,

to the difference between the value of the bond and that of your tuition obligation? What iff rates fall to

7 % ?

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