(Ch.24 CF Matching) A firm's liabilities are $1.3mln in the end of year 1, $2.5mln...
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(Ch.24 CF Matching) A firm's liabilities are $1.3mln in the end of year 1, $2.5mln at the end of year 2, and $3.3mln at the end of year 3. Assume that annual-coupon bonds are available with following coupons: a 3-year bond with a 4.3% coupon, a 2-year bond with a 3.4% coupon, and a 1-year bond with a 2.1% coupon. How much of the par value of the three-year bond should the firm buy to implement cash flow matching? (Record your answer ito the nearest $0.001mln, drop the $ symbol. E.g., if your answer is $3.5675mln, record it as 3.568.)
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