Question: You will be attending an MBA program that will require paying $11,000 a year in tuition expenses at the end of the year for 2

You will be attending an MBA program that will require paying $11,000 a year in tuition expenses at the end of the year for 2 years. Bonds currently yield 8.35% a What is the present value of your obligation 7 sample answer: $25,000) b What is the duration of your obligation 7 (sample answer: 2.53 years) Suppose you wish to fund your obligation using 1-year zero-coupon bonds and perpetuity bonds. How much of 1 year zero in dollar inpute xample: $25,000) and how much of perpetuity bonds in dollar sample answer: $25,000 ) will you want to hold to both fully fund and immunize your obligation? Suppose you buy 1-year zero-coupon bonds and perpetuity bonds to immunize your obligation. Now suppose that rates immediately increase to 9 e. What is your tuition obligation now? (sample answer: $25,000) f. What is the value of your position in 1-year-zero-coupon bonds now 7 (sample answer: 525.000) g. What is the value of your position in perpetuity now ? (sample answer: 525,000)

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