You will be paying $10,800 a year in tuition expenses at the end of the...
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You will be paying $10,800 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%. a. What is the present value and duration of your obligation? b. What maturity zero-coupon bond would immunize your obligation? c. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 10%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation? d. What if rates fall immediately to 6%? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D What is the present value and duration of your obligation? (Do not round intermediate calculations. Round "Present value to 2 decimal places and "Duration" to 4 decimal places.) Present value Duration years
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