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Unformatted text preview: b. Calculate f [1.0,2.5] . 3. An insurance company is obligated to pay a two year increasing annuity. The annuity pays 100,000 at the end of one year and 150,000 at the end of two years. Amanda wants to exactly match the cash flows from this annuity using the following two bonds: a. Bond A is a one year bond maturing for 1000 with annual coupon rate of 7.5% b. Bond B is a two year bond maturing for 1500 with an annual coupon of $100. Calculate the amount of each bond that Amanda should purchase....
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- Spring '08
- Math, Amanda, spot interest rates, Chupp Corporation, Chupp Stock