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A pension plan is obligated to make disbursements of $1 million, $2 million, $5 million, and $1 million at the end of each of the
A pension plan is obligated to make disbursements of $1 million, $2 million, $5 million, and $1 million at the end of each of the next four years, respectively. If the plan wants to fully fund and immunise its position, how much of its portfolio should it allocate to one-year zero-coupon bonds and perpetuities, respectively, if these are the only two assets funding the plan? Assume the interest rate is 10% annually. Duration is 2.6019 Duration is 2.7329 Duration is 2.6873 Duration is 2.5871
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