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How much must ql invest in each strip

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Reference no: EM132967964

Problem 1: The yield curve is flat at 10% (expressed as an APR with semiannual compounding). QL Co must make a 8M payment in 5 years. QL Co has available 2-year strips and 10-year strips. To create a portfolio that immunizes the liability stream using target-date immunization, how much must QL invest in each strip?

A. 5M in the 2-year strip and 3M in the 10-year strip.
B. 3M in the 2-year strip and 5M in the 10-year strip.
C. 1.84M in the 2-year strip and 3.07M in the 10-year strip.
D. 3.07M in the 2-year strip and 1.84M in the 10-year strip.
E. Not enough information has been provided.

Reference no: EM132967964

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