Two insurers have a reserve of $10 million which will be paid in a single payment in 5 years. Current interest rate is 5%. In order to fund this liability, the following assets are available: (a) Calculate the price of the three bonds, answer in millions rounded to two digits. (b) Calculate the duration of each bond. Bond Maturity (years) Par value (M) Annual coupon Duration Price (M) A 5 10.0 8.0 B 5 0% 4.52% 2.76% DA DB DC PA PB PC C 7 9 (c) The first investor expects interest rates to go down in the next ten years and wants to use that projection to increase surplus. Meanwhile, the second investor does not project interest rates. Which asset should both investors pick? Explain your reasoning. Two insurers have a reserve of $10 million which will be paid in a single payment in 5 years. Current interest rate is 5%. In order to fund this liability, the following assets are available: (a) Calculate the price of the three bonds, answer in millions rounded to two digits. (b) Calculate the duration of each bond. Bond Maturity (years) Par value (M) Annual coupon Duration Price (M) A 5 10.0 8.0 B 5 0% 4.52% 2.76% DA DB DC PA PB PC C 7 9 (c) The first investor expects interest rates to go down in the next ten years and wants to use that projection to increase surplus. Meanwhile, the second investor does not project interest rates. Which asset should both investors pick? Explain your reasoning