You owe $40,000 in 2 years time. Annualised yields are 7% at all horizons. There is a
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You owe $40,000 in 2 years’ time. Annualised yields are 7% at all horizons. There is a 1-year zero-coupon bond, and a 5-year annuity paying $4 per year. To the nearest cent, how much should you invest in the 1-year bond and 5-year annuity to immunise yourself against interest rate risk?
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Step1 Find the Duration of each investment Duration of 1 year z... View the full answer
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