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You will be paying $9,500 a year in tuition expenses at the end of the...

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Accounting

You will be paying $9,500 a year in tuition expenses at the end of the next two years. Bonds currently yield 8%.
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 7%?
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