What must be the face value and market value

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Question: Briefly explain why bonds of different maturities have different yields in terms of the expectations and liquidity preference hypotheses. Briefly describe the implications of each hypothesis when the yield curve is upward-sloping; downward-sloping.

An insurance company must make payments to a customer of $10 million in one year and $4 million in five years. The yield curve is flat at 10%.

a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase?

b. What must be the face value and market value of the zero-coupon bond?

Reference no: EM131948755

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