Question: Assume that the current spot rates are 2% annually compounded for tless than or equal to 5 years, and 5% for i> 5 years.

Assume that the current spot rates are 2% annually compounded for tless

Assume that the current spot rates are 2% annually compounded for tless than or equal to 5 years, and 5% for i> 5 years. Suppose you have an obligation with a present value of $1 million and a quasi-modified duration of 10 years, and that you want to immunize your obligation by buying 5-year and 30-year zero coupon bonds. What is the market value (i.e. percentage price times face value) that you must buy of the 30 year bond? (nearest $1) Caution! We are dealing with annual compounding and quasi-modified duration!

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