You will be paying $$8,500$ a year in tuition expenses at the end of the next two years. Bonds currently yield $6\%.$

Required:

a$.$ What are the present value and duration of your obligation?

b$.$ What maturity zero$-$coupon bond would immunize your obligation?

c$.$ Suppose you buy a zero$-$coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to $7\%.$ What happens to your net position, that is$,$ to the difference between the value of the bond and that of your tuition obligation?

d$.$ What if rates fall immediately to $5\%$

You will be paying $$8,500$ a year in tuition expenses at the end of the next two years. Bonds currently yield $6\%.$

Required:

a$.$ What are the present value and duration of your obligation?

b$.$ What maturity zero$-$coupon bond would immunize your obligation?

c$.$ Suppose you buy a zero$-$coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to $7\%.$ What hoppens to your net position, that is$,$ to the difference between the value of the bond and that of your tuition obligation?

d$.$ What if rates fall immediately to $5\%?$

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Required A

Required B

Required C

Required $0$

Suppose you buy a zero$-$coupon bond with value and duration equal to your oblligation. Now suppose that I increase to $7\%.$ What happens to your net position, that is$,$ to the difference between the value of the bon tuition obligation?

Note: Do not round intermediate calculations. Input the amount as a positive value. Round your answer to

decreases

in value by

$ $1,301\mathrm{.}29$

You will be paying $$8,500$ a year in tuition expenses at the end of the next two years. Bonds currently yield $6\%.$

Required:

a$.$ What are the present value and duration of your obligation?

b$.$ What maturity zero$-$coupon bond would immunize your obligation?

c$.$ Suppose you buy a zero$-$coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to $7\%.$ What happens to your net position, that is$,$ to the difference between the value of the bond and that of your tuition obligation?

d$.$ What if rates fall immediately to $5\%?$

Answer is complete but not entirely correct.

Complete this question by entering your answers in the tabs below.

Required A

Required B

Required C

What if rates fall immediately to $5\%?$

Note: Do not round intermediate calculations. Input the amount as a positive value, Round your answer

Net position

decreases

in value by

$ $1,306\mathrm{.}33$