Q1. Suppose you must make a payment of 10,000 at the end of each of...
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Q1. Suppose you must make a payment of 10,000 at the end of each of the next two years and the prevailing interest rate is 8% per annum a) What is 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. Calculate the face value (future redemption value) of the zero coupon bond Now suppose rates immediately increase to 9%, what happens to your net position? What if rates fall to 7%
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