Post a New Question

investing

posted by .

You work for an insurance company. You have an obligation to pay $1 mln in exactly 1.5 years from today. Your goal is to provide the company with an immunized portfolio that would hedge the current obligation. The company is only interested in first-order immunization, so you do not have to deal with convexity.

There are two bonds in the market: the first bond has 1 year till maturity, pays 5% coupon rate and is traded at yield 4%. The second one has 2 years to maturity, 3% coupon and is traded at yield 4%. Assume all coupons are paid twice per year. Please provide the approximate quantities invested in every bond (in thousand dollars). Assume one can buy fractions of bonds.

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. adult education

    Briefly describe the cookie production process. 2. What are two ways that the company has increased productivity?
  2. accounting

    A company has an insurance policy for fifty thousand dollars that is due. How is this set up when the company does not pay it in full. It is paid monthly to an insurance premium company within one year. How do we set it up on the company …
  3. business math

    The property of Al’s garage is worth $300,000. Al has a fire insurance policy of $180,000 that contains an 80% coinsurance clause. What will the insurance company pay on a fire that causes $210,000 damage?
  4. accounting

    As in previous homework, assume you work for a company that has to pay an obligation of USD 1 mln in 1.5 years from today. There are two bonds on the market - one is a 3%-coupon bond, has one year to maturity and is traded at price …
  5. Math

    a company will need $30,000 IN 7 YEARS FOR AN ADDTION. TO MEET THIS GOAL THE COMPANY DEPOSITS MONEY IN AN ACCOUNT TODAY THAT PAYS 7% ANNUAL INTREST COMPONDED QUARTERLY. TO FIND THE AMOUNT THAT SHOULD BE INVESTED TO $30,000 IN 7 YEARS. …
  6. math

    A company will need $65,000 in 6 years for a new addition. To meet this goal the company deposits money in an account today that pays 5% annual intrest compound quarterly. Find the amount that should be invested to total $65,000 in …
  7. math

    A company will need 50,000 in 6 years to add a new addition. To meet this goal a company depsoits money in account that pays 7% annual intrest quarterly. Find the amount that should be deposit today to reach the goal of 50,000 in 6 …
  8. math

    A company will need 55,000 for a new addition. To meet this goal the company deposits money in an account today that pays 5% interest annual compound quarterly. to meet this goal in five years what would the company need to deposit …
  9. mth 156

    a company needs $55,000 in 7 years for a new addition. To meet this goal, the company needs to deposit money in an acct today that pays 5% annual interest compounded quarterly. What amount should the company invest to total $55,000 …
  10. math

    An automotive insurance company has 25,000 policyholders. The accident rate is 0.07. The number of accidents the company will have to pay out for is If the payout for each claim (after deductibles) is $8,000, the company’s total …

More Similar Questions

Post a New Question