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Words:0 QUESTION 11 Janet has three future liabilities, listed in the following table. Today, she has just enough cash to cover the PV of all
Words:0 QUESTION 11 Janet has three future liabilities, listed in the following table. Today, she has just enough cash to cover the PV of all three future liabilities. Janet is concerned about interest rate risk. A (an) (increase/decrease) in interest rates will hurt her current position and make her "under-funded". Janet chooses to use a duration matching to immunize her interest rate exposure. She finds 6TZCB and 10TZCB to be attractive for her hedging purpose. All spot rates are given below. Compute the value and face value of the 6TZCB and 10TZCB that Janet needs to buy to achieve her goals. Show your work Maturity (years) Liabilities Spot Rate (EAY 3.5% 5 $20,000 6 3.7% None 10 4.096 None 13 4.296 $12,000 18 4.4% $9,000 Q1: Without any interest rate hedge, a (an) make her "under-funded". (increase/decrease) in interest rates will hurt her current position and Q2: To proper perform a duration matching. Janet needs to buy: Words:0 QUESTION 11 Janet has three future liabilities, listed in the following table. Today, she has just enough cash to cover the PV of all three future liabilities. Janet is concerned about interest rate risk. A (an) (increase/decrease) in interest rates will hurt her current position and make her "under-funded". Janet chooses to use a duration matching to immunize her interest rate exposure. She finds 6TZCB and 10TZCB to be attractive for her hedging purpose. All spot rates are given below. Compute the value and face value of the 6TZCB and 10TZCB that Janet needs to buy to achieve her goals. Show your work Maturity (years) Liabilities Spot Rate (EAY 3.5% 5 $20,000 6 3.7% None 10 4.096 None 13 4.296 $12,000 18 4.4% $9,000 Q1: Without any interest rate hedge, a (an) make her "under-funded". (increase/decrease) in interest rates will hurt her current position and Q2: To proper perform a duration matching. Janet needs to buy
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