Question: Please help me answer this question using an excel sheet. Immunization Your company has just built and patented a laser defense system and is planning

Please help me answer this question using an excel sheet.

Immunization

Your company has just built and patented a laser defense system and is planning on installing the equipment in various locations around the country. To finance the installations, you, the CFO, have borrowed $1 billion, which your company will need to repay in five years. The market interest rate is 8%, so the present value of this obligation is $680,583,197. You decide to fund the obligation using three-year zero-coupon bonds and perpetuities that make annual coupon payments.

1. How can you immunize the obligation? (Here, you need to construct an immunized portfolio that consists of the zero-coupon bonds and the perpetuities.)

2. Now suppose that one year has passed and that the market rate is still 8%. You need to ensure that the obligation is still fully-funded and immunized. Is the obligation still fully-funded and immunized? If not, what do you need to do to fully fund and immunized the obligation?

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