Hands Insurance Company issued a $90 million, one-year, zero-coupon note at 8%(paying one coupon at the end of the year) yield. The proceeds were used to fund a $100million, two-year commercial loan with a 10% coupon rate and a 10% yield. Immediatelyafter these transactions were simultaneously closed, all market interest rates increased1.5% (150 basis points)
What is the true market value of the loan investment and the liability after thechange in interest rates?