Question
A pension fund has an average duration of its liabilities equal to 18 years. The fund is looking at 4-year maturity zero-coupon bonds and 5%
A pension fund has an average duration of its liabilities equal to 18 years. The fund is looking at 4-year maturity zero-coupon bonds and 5% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan?
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Modern Portfolio Theory and Investment Analysis
Authors: Edwin Elton, Martin Gruber, Stephen Brown, William Goetzmann
9th edition
9781118805800, 1118469941, 1118805801, 978-1118469941
