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Business, 12.08.2020 04:01 cam961

You plan to purchase a home in x years. The goal is to have $L as a down payment. In order to meet that goal, you invest in two zero coupon bonds. One zero coupon bond for face amount A matures in x−t years. A second zero coupon bond for face amount B matures in x+t years. You choose amount A and B employing a full immunization strategy so that $L is immunized from interest rates changes. Assume the force of interest is δ. Calculate B−A.

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