You have 2 years left in grad school. Tuition is $27,338 per year, due at the...

You have 2 years left in grad school. Tuition is $27,338 per year, due at the end of each school year, and the next payment is due a year from today. If you are looking to immunize against future tuition payment using a single issue of a zero coupon bond, then how much should you invest in it? Assume a flat yield curve of 7.1%. Assume annual compounding. Round your answer to 2 decimal places.

Expert Solution

Calculating Amount in Zero Coupon Bond,

Amount = 27,338/(1.071) + 27,338/(1.071)²

Amount = $49,359.18

jeff jeffy answered 2 years ago

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