Question: Problem 5: You will be paying $10, 000 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%.

Problem 5: You will be paying $10, 000 a year in

Problem 5: 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? 2. Suppose you buy a zero-coupon with value and duration equal to your obligation. Now suppose that rates immediately increase to 9%. what of the bond and that of your tuition obligation? what if rates fall to 7%

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