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The insurance company collected $6,000,000 in insurance premiums against these liabilities. The insurance company is considering to invest in 6-year zero coupons bond and a
The insurance company collected $6,000,000 in insurance premiums against these liabilities. The insurance company is considering to invest in 6-year zero coupons bond and a 10 years zero coupon bond where each has a $1000 face value. Determine the following in the yellow highlighted cells. | ||||||||
Bond/Maturity | Interest rate | # of bonds to buy | Bond Value | Total $ investment | ||||
6 | 0.06 | |||||||
10 | 0.074 | |||||||
Total Investment | ||||||||
If the spot rates increases by 0.25%, the current value of your bond investment | ||||||||
A | remains the same | |||||||
B | declines | |||||||
C | increases | |||||||
D | depends on other bond features |
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