An insurance company must make payments to a customer of $20 million one year and $8 million in five years. The yield curve is flat at 16%. A. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon, what maturity bond must it purchase? B. What must be the face value and market value of that zero coupon bond?

Answer rating: 100% (QA)

Answer Immunizing the Insurance Companys Obligation A Bond Maturity To fully fund and immunize the i... View the full answer