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You will be paying $ 8 , 6 0 0 a year in tuition expenses at the end of the next two years. Bonds currently

You will be paying $8,600 a year in tuition expenses at the end of the next two years. Bonds currently yield 7%.
Required:
What are the present value and duration of your obligation?
What maturity zero-coupon bond would immunize your obligation?
Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. 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 5%?You will be paying $8,600 a year in tuition expenses at the end of the next two years. Bonds currently yield 7%.
Required:
a. What are the present value and duration of your obligation?
b. What maturity zero-coupon bond would immunize your obligation?
c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates
immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and
that of your tuition obligation?
d. What if rates fall immediately to 5%?
Complete this question by entering your answers in the tabs below.
What maturity zero-coupon bond would immunize your obligation?
Note: Do not round intermediate calculations. Round "Duration" and "Face value" to 2 decimal places.
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