29. An insurance company has expected liabilities of 5,000 and 10,000 at the end of year 1 and 2 respectively. The following annual coupon bonds are available: Years to Maturity Annual Coupon Rate Annual Effective Yield Par Value 1 0% 10% 1000 2 12% 12% 1000 Determine the cost to the company today to match its expected liabilities exactly. A. 11,000 B. 11,500 C. 12,000 D. 12,500 E. 13,000

College Accounting, Chapters 1-27
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ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter23: Statement Of Cash Flows
Section: Chapter Questions
Problem 1CP: CHALLENGE PROBLEM The long-term liabilities section of Guyton Enterprises follows. The bonds...
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29. An insurance company has expected liabilities of 5,000 and 10,000 at the end of year 1 and 2 respectively. The following annual coupon bonds are available: Years to Maturity Annual Coupon Rate Annual Effective Yield Par Value 1 0% 10% 1000 2 12% 12% 1000 Determine the cost to the company today to match its expected liabilities exactly. A. 11,000 B. 11,500 C. 12,000 D. 12,500 E. 13,000

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