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| rev | Admin | (Created page with "'''Solution: E''' PV of liabilities is <math display = "block">402.11(1/1.1 + 1/1.1^2 + 1/1.1^3)=1000.</math> Duration of liabilities is <math display = "block">402.11(1/1.1 + 2/1.1^2 + 3/1.1^3)/1000 = 1.93653.</math> Let X be the investment in one-year bonds. To match duration, since zero-coupon bonds have duration = maturity, 1.93653 = [X + 3(1000 –X)]/1000. Then, 2X = 3000 – 1936.53 = 1063.47 and X = 532. {{soacopyright | 2023 }}") | Nov 20'23 at 21:26 | +446 |