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How can the manager immunize the obligation

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Question - A company must make a payment of $18,983 in 11 years. The market interest rate is 6%. The company's portfolio manager wishes to fund the obligation using four-year zero-coupon bonds and perpetuities paying annual coupons.

i. How can the manager immunize the obligation?

ii. Suppose that three years have passed, and the interest rate remains at 6%. Is the position still fully funded? Is it still immunized? If not, what actions are required?

Reference no: EM133050551

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