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A company has liabilities of $1800 and $2150 due at the end of years 1 and...

A company has liabilities of $1800 and $2150 due at the end of years 1 and 2 respectively. The only investments available are 1-year 5% annual coupon bonds and 2-year 6% annual coupon bonds and both redeemable at par and with an effective yield of 3%.

What is the total cost to the company in order to exactly (absolutely) match the assets and liabilities at a 3% annual effective rate?

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ekkarill92 answered 1 year ago
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