Immunization with zero-coupon bonds

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(Immunization with zero-coupon bonds)

You will be paying your suppli a year at the end of the next 3 years. Bonds currently yield 8%.

(a) Calculate the present value and duration of your obligation.

(b) Calculate the Face Value of a zero-coupon bond that would imm obligations.

(c) If the interest rate immediately decreases to 7%. What happens position, assuming you are buying the zero-coupon bond in part (b).

Reference no: EM133073808

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