In five years, you will have to pay a single and deterministic liability, amounting to \(\$ 10,000\). The only asset you may use is a bond paying a \(7 \%\) annual coupon and maturing in six years. At present, yield is \(6 \%\) with annual compounding.

- Assuming asset divisibility, how much should you buy of this bond?

- What is the performance of the resulting ALM policy if yield goes up or down by 100 basis points? How do you explain the result? Assume that the change is immediate and instantaneous.