A business must make payments of $10 per year in the form of a 10-year immediate annuity.
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A business must make payments of $10 per year in the form of a 10-year immediate annuity. He plans to buy two zero coupon bonds to finance these payments. The first bond matures in 2 years and the second bond matures in 9 years, and both are purchased to yield 10% cash.
What face value of bond must the firm buy to be immunized against small changes in the interest rate (redington immunization)?
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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