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The answer is $1.314 Million I don't know how to solve it, though. Please show work. Thanks! p.s. ANSWER IS NOT $1.98 Million Suppose that
The answer is $1.314 Million I don't know how to solve it, though. Please show work. Thanks!
p.s. ANSWER IS NOT $1.98 Million
Suppose that you manage a pension fund that has liabilities of $2 million, $4 million, $8 million, and $10 million coming due in 1, 2, 3, and 4 years, respectively. You want to invest in bonds whose cash flows will exactly match the liabilities. The following bonds are available: 1-year, 2-year, 3-year, and 4-year annual-coupon bonds selling at par; the yields (YTMs) are 1%,2%,3%, and 4%, respectively. What's the necessary dollar amount of investment in 1-year bond today? \$1.327 million $1.314 million \$1.229 million \$1.337 millionStep by Step Solution
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