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Tower Insurance must make payments to a customer of $10 million in one year and $4 million in five years. The yield curve is flat
Tower Insurance must make payments to a customer of $10 million in one year and $4 million in five years. The yield curve is flat at 10%. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase? What must be the face value and market value of that zero-coupon bond?
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