Question: Need help with C) only, answers for a + b are already provided. You will be paying $10,000 a year in tuition expenses at the

Need help with C) only, answers for a + b are already provided.

  1. You will be paying $10,000 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%.
  1. What is the present value and duration of your obligation? 9259.26+8573.39=17 832.65, Duration = 1.48 years
  2. What maturity zero-coupon bond would immunize your obligation? 1.48 years
  3. Suppose you buy a zero-coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation?

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