You will be paying 10000 a year in education expenses at the end of the next 2years. Currently the yield curve is flat at 8%.

You will be paying 10000 a year in education expenses at the end of the next 2years. Currently the yield curve is flat at 8%.

  1. if you want to fully fund and immunize your obligation with a single issue of a zero-coupon, what maturity bond must you purchase?
  2. what must be the market value and the face value of the zero coupon bond?
  3. instead of using a single zero coupon bond , you prefer to use a one year Tbilisi and a five year zero coupon bond to fund and immunize your obligation. How much of each security will u buy?

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