An insurance company must make payments to a customer of 12, Ask an Expert

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An insurance company must make payments to a customer of $12 million in 1 year and $6 million in 3 years. The yield curve is flat at 8%.

a. If it wants to fully fund and immunize its obligation to this customer with a single issue of a zero-coupon bond, what maturity bond must it purchase?

(Do not round intermediate calculations. Round your answer to 4 decimal places.)

Maturity of zero coupon bond

b. What must be the face value and market value of that zero-coupon bond? (Do not round intermediate calculations.

Enter your answers in millions rounded to 2 decimal places. Omit the " tiny_mce_markerquot; sign in your response.) Face value Market value.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92766507

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