Question
A pension plan has $10 million in assets and $12 million in liabilities. The assets earn a fixed rate of return of 6% annually, while
A pension plan has $10 million in assets and $12 million in liabilities. The assets earn a fixed rate of return of 6% annually, while the liabilities are expected to grow at an annual rate of 4%. The pension plan wants to immunize its liabilities by matching the duration of its assets with the duration of its liabilities. The duration of the liabilities is 10 years. What is the duration of the assets needed to immunize the pension plan's liabilities?
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