Question: An insurance company needs to pay 10 million in years 2 and 3 from now. The term structure is flat at r=2%. The companys assets

An insurance company needs to pay £10 million in years 2 and 3 from now. The term structure is flat at r=2%. The company’s assets are held in cash and the company’s net worth is zero. The company wants to immunize its liabilities by investing in a 3-year bond with a coupon of c% of the face value of £100. What should be the coupon such that the company can immunize its liabilities and has enough cash for implementing the immunization strategy?

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