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| rev | Admin | (Created page with "'''Solution: D''' The present value of the liabilities is 1000, so that requirement is met. The duration of the liabilities is <math display = "block">402.1\,[1.1^{-1}+2(1.1)^{-2}+3(1.1)^{-3}]/1000=1.9365.</math> Let X be the investment in the one-year bond. The duration of a zero-coupon is its term. The duration of the two bonds is then <math display = "block"> [X + (1000-X)(3)]/1000 = 3-0.002X. </math> Setting this equal to 1.9365 and solving yields X = 531.75....") | Nov 20'23 at 21:00 | +500 |