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You will be paying $ 8 , 0 0 0 a year in tuition expenses at the end of the next two years. Bonds currently
You will be paying $ a year in tuition expenses at the end of the next two years. Bonds currently yield Required:
What are the present value and duration of your obligation?
What maturity zerocoupon bond would immunize your obligation?
Suppose you buy a zerocoupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to What happens to your net position, that is to the difference between the value of the bond and that of your tuition obligation?What if rates fall immediately to
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