Suppose that you have a liability of 1000 per year in, Financial Management

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Suppose that you have a liability of 1000 per year in

Suppose that you have a liability of $1000 per year in perpetuity and the current interest rate for discounting this perpetuity is 8%. To hedge the value of this perpetuity, you decide to buy a 20-year bond (which also has a discount rate of 8%).

How much of a 20-year bond do you need to buy?

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