please do (b) answer is 1.6328

CASHFLOW DURATION AND IMMUNIZATION 443 O of ATION 7.2 I of Liabilities of 1 each of 1 each are due at the ends of periods 1 and 2. There curities available to produce asset income to cover are three securities availah these liabilities, as follows: ) A bond due at the end of period 1 with coupon period, valued at a periodic yield of 14%; () A bond due at the end of period 2 with coupon rate 2% per period, valued at a periodic yield of 15%; (ii) A bond due at the end of period 2 with coupon rate 20% per period, valued at a periodic yield of 14.95%. Determine the cost of the portfolio that exactly matches asset income to liabilities due using (a) bonds (i) and (ii) only. (b) bonds (i) and (iii) only cost of all exact-matching now that the combination of securities in (b) minin of the three act-matching portfolios made up of a combination e three securities. Note that the minimum mng portfolio does not use the highest yielding security in matching portfolio this case. 12 In ordan 1 liabilities in