13. My pension plan will pay me $10,000 once a year for a 10-year period. The first...

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13. My pension plan will pay me $10,000 once a year for a 10-year period. The first payment will come in exactly 5 years. The pension fund wants to immunize its position.

a. What is the duration of its obligation to me? The current interest rate is 10% per year.

b. If the plan uses 5-year and 20-year zero-coupon bonds to construct the immunized position, how much money ought to be placed in each bond? What will be the face value of the holdings in each zero?

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Investments

ISBN: 9780077261450

8th Edition

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

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