Question: 3. (10 marks) (Immunization with zero-coupon bonds) You will be paying your suppli a year at the end of the next 3 years. Bonds

3. (10 marks) (Immunization with zero-coupon bonds) You will be paying your suppli a year at the end of the next 3 years. Bonds currently yield 8%. (a) (4 marks) Calculate the present value and duration of your obligation. (b) (2 marks) Calculate the Face Value of a zero-coupon bond that would imm obligations. (c) (4 marks) If the interest rate immediately decreases to 7%. What happens t position, assuming you are buying the zero-coupon bond in part (b).

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