You will be poying $$10,600$ a year in tuition expenses at the end of the next two years. Bonds currently yield $7\%.$

Required:

a$.$ What sre the present value and durstion of your obligotion? $($Do not round Intermedlate calculations. Round "Present value" to $2$

decimal places and "Duration" to $4$ decimal places.$)$

Answer is complete and correct.

b$.$ What is the duration of a zero$-$coupon bond that would immunize your obligation and its future redemption value? $($Do not round

Intermediate calculations. Round "Duration" to $4$ decimal places and "Future redemption value" to $2$ decimal places.$)$

Answer is complete and correct.

c$.$ Suppose you buy o zero$-$coupon bond with value and durstion equal to your obligation. Now suppose that rates immedistely

incresse to $8\%.$ What happens to your net position, that is$,$ to the difference between the value of the bond and that of your tuition

obligstion? $($Enter your answer as a positive value. Do not round Intermediate calculations. Round your answer to $2$ decimal

places.$)$

Answer is complete but not entirely correct.

Nat positian changes by

$ $2,340\mathrm{.}73$

d$.$ Suppose you buy a zero$-$coupon bond with value and durstion equsl to your obligation. Now suppose that rates immedistely falls to

$6\%.$ What hsppens to your net position, that is$,$ to the difference between the value of the bond and that of your tuition obligation?

$($Enter your answer as a positive value. Do not round Intermedlate calculations. Round your answer to $2$ decimal places.$)$

Answer is complete but not entirely correct.