An insurance company must make payments to a customer of 8, Ask an Expert

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An insurance company must make payments to a customer of $8 million in 1 year and $4 million in 4 years. The yield curve is flat at 9%.

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 years

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.:- M92766654

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