You will be paying $10,700 a year in tuition expenses at the end of the next two years. Bonds currently yield 10%.

a.	What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value" to 2 decimal places and "Duration" to 4 decimal places.)

Present value	$
Duration	years

b.	What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value? (Do not round intermediate calculations. Round "Duration" to 4 decimal places and "Future redemption value" to 2 decimal places.)

Duration	years
Future redemption value	$

You buy a zero-coupon bond with value and duration equal to your obligation.

c-1.	Now suppose that rates immediately increase to 11%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Net position changes by

$

c-2.	What if rates fall to 9%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Net position changes by

$