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You will be paying $34,000 a year in tuition expenses at theend of the next two years. Bonds currently yield 10%. (20points)What is the present value and duration of your obligation?What maturity zero-coupon bond would immunize yourobligation?Suppose you buy a zero-coupon bond with value and durationequal to your obligation. Now suppose that rates immediatelyincrease to 11%. What happens to your net position, that is, to thedifference between the value of the bond and that of your tuitionobligation? What if rates fall to 9%?
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