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An institute has provided an early retirement incentive package to a 60-year-old retiree that pays...

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Finance

An institute has provided an early retirement incentive package to a 60-year-old retiree that pays 12,000 per year at the end of each year up to and including age 65, plus a lump sum payment of 150,000 at age 65. All payments are guaranteed whether or not the retiree is alive at age 65. The institute will create a portfolio of two five-year bonds to exactly match the payments under this package. The first bond has a face amount of 100,000 and an annual coupon rate of 10%. Determine which of the following second bonds will exactly match the liability.
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193. An institute has provided an early retirement incentive package to a 60-year-old retiree that pays 12,000 per year at the end of each year up to and including age 65 , plus a lump sum payment of 150,000 at age 65 . All payments are guaranteed whether or not the retiree is alive at age 65 . The institute will create a portfolio of two five-year bonds to exactly match the payments under this package. The first bond has a face amount of 100,000 and an annual coupon rate of \10. Determine which of the following second bonds will exactly match the liability

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