You will be paying $$8,600$ a year in tuition expenses at the end of the next two years. Bonds currently yield $7\%.$

Required:

What are the present value and duration of your obligation?

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

Suppose you buy a zero$-$coupon bond with value and duration equal to your obligation. Now suppose that rates immediately increase to $9\%.$ What happens to your net position, that is$,$ to the difference between the value of the bond and that of your tuition obligation?

What if rates fall immediately to $5\%?$You will be paying $$8,600$ a year in tuition expenses at the end of the next two years. Bonds currently yield $7\%.$

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 $9\%.$ 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 $5\%?$

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

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

Note: Do not round intermediate calculations. Round "Duration" and "Face value" to $2$ decimal places.