The annual effective rate of interest

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Reference no: EM132031810

Suppose there is a liability of 1000 at the end of 2 years. There are two assets with cash inflows of A and B at the end of 1 and 4 years, respectively, which fully immunize the liability. The value of the cash flows A and B at the end of 2 years is 1000. The annual effective rate of interest is 5%. Determine A and B. (A) A = 606 and B = 400 (B) A = 635 and B = 368 (C) A = 641 and B = 360 (D) A = 650 and B = 350 (E) A = 665 and B = 333.

Reference no: EM132031810

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