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The pension fund you manage must make a payment of $250,000 in ten years. The ten-year interest rate is currently 8% per annum. You want
The pension fund you manage must make a payment of $250,000 in ten years. The ten-year interest rate is currently 8% per annum. You want to fund this liability using five-year zero-coupon bonds and perpetuities. In order to make your bond portfolio immune to interest rate risk, how much in dollars should you invest in five-year zero coupon bonds, and how much in perpetuities?
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To make the bond portfolio immune to interest rate risk we need to ensure that the value of the bond ...
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International Economics
Authors: Robert C. Feenstra, Alan M. Taylor
3rd edition
978-1429278515, 142927851X, 978-1319029517, 1319029515, 978-1429278447
