In order to immunize the firm from interest rate risk

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A firm has $20,000,000 in assets and $14,000,000 in liabilities. The assets have an average "duration" of 7 years. It has two investment choices: 1) a zero coupon bond yielding 7.5 percent and maturing in 9 years and 2) a 199 year bond yielding and paying 10 percent. In order to immunize the firm from interest rate risk, what amounts in each do you recommend?

Reference no: EM131361312

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