What is the present value and duration of the obligation

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You will be paying $11,800 a year in tuition expenses at the end of the next two years. Bonds currently yield 9%.

What is the present value and duration of your obligation?

What is the duration of a zero-coupon bond that would immunize your obligation and its future redemption value?

Now suppose that rates immediately increase to 10%. What happens to your net position, that is, to the difference between the value of the bond and that of your tuition obligation?

What if rates fall to 8%?

Reference no: EM13334086

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