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| rev | Admin | (Created page with "'''Solution: C''' Macaulay duration of the liability is 3 . Asset duration must equal 3. Let <math>P_1</math> and <math>P_4</math> be the present values of the two assets. <math display = "block"> \begin{aligned} & \frac{P_1 \cdot 1+P_4 \cdot 4}{P_1+P_4}=3 \text {, then } P_4=2 P_1 \\ & P_1=\frac{20,000}{1+i}, P_4=\frac{50,000}{(1+i)^4}, \frac{P_1}{P_4}=\frac{P_1}{2 P_1}=\frac{1}{2}=\frac{\frac{20,000}{\frac{1+i}{50,000}}}{(1+i)^4}: 1=0.8(1+i)^3: \\ & (1+i)^3=1.25 ;(1+i...") | Nov 20'23 at 22:04 | +772 |