What is the cost to the company today

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Question - An insurer must pay 3,000 and 4,000 at the ends of years 1 and 2, respectively. The only investments available to the company are a one-year zero-coupon bond (with a par value of 1,000 and an effective annual yield of 5%), and a two-year 8% annual coupon bond (with a par value of 1,000 and an effective annual yield of 6%). What is the cost to the company today to match its liabilities exactly?

Reference no: EM132953209

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