Suppose your team is working on a consulting project for Go Green Insurance company. The company is expecting the following sequence of liabilities in the following five years:
The company is trying to minimize the cost to match these liabilities. In the market, there are seven different bonds, which could be purchased to match the liabilities. Each bond will provide the following sequence of cash flows if purchased:How many of each bonds should Go Green Insurance company purchase, in order to minimize the cost (the total price paid for the bonds)? Assume the annual effective interest rate is 10%. Submit a one page actuarial report with your recommendations.
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