Question: a) Using the information about the zero-coupon bonds, draw the yield curve and compute two forward rates of your choice. b) Calculate the duration of

a) Using the information about the zero-coupon bonds, draw the yield curve and compute two forward

rates of your choice.

b) Calculate the duration of the liability.

c) The insurance company desires a rate of return of 11% for its investments. Using the securities listed

above, design an investment portfolio that is immunized from small interest rate changes and

provides an expected return of at least 11%. If such a portfolio is impossible to achieve with the

securities listed above, what return can be achieved?

d) How can the liabilities of the insurance completely immunized from all interest changes? Explain

your approach and build the portfolio.

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