You are the investment manager for the Stevens Life Insurance Company (SLIC) that specializes in Guaranteed...

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You are the investment manager for the Stevens Life InsuranceCompany (SLIC) that specializes in Guaranteed Investment Contracts.A pension plan, which is a customer of your company, deposits$1,000,000 with you, in a contract that guarantees 5% per annum forthe next two years. The pension plan will withdraw half of theaccount balance at the end of the first year, and the rest at theend of two years, You have two assets available for your company’sinvestments: a one-year risk-free zero coupon bond yielding 5.5%per annum, and a two-year zero-coupon bond yielding 6% per annum.Build a cash flow matching strategy that ensures the clientguaranteed income and determine your profit.

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All financials below are in Amount deposited by Pension fund A 1000000 Guaranteed return R 5 per annum Account balance after year 1 A x 1 R 1000000 x 1 5 1050000 Amount to be withdrawn by the pension See Answer

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You are the investment manager for the Stevens Life InsuranceCompany (SLIC) that specializes in Guaranteed Investment Contracts.A pension plan, which is a customer of your company, deposits$1,000,000 with you, in a contract that guarantees 5% per annum forthe next two years. The pension plan will withdraw half of theaccount balance at the end of the first year, and the rest at theend of two years, You have two assets available for your company’sinvestments: a one-year risk-free zero coupon bond yielding 5.5%per annum, and a two-year zero-coupon bond yielding 6% per annum.Build a cash flow matching strategy that ensures the clientguaranteed income and determine your profit.