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A superannuation (retirement) fund must make payments to a customer of $12 million in 1 year and $4 million in 5 years. The yield curve

A superannuation (retirement) fund must make payments to a customer of $12 million in 1 year and $4 million in 5 years. The yield curve is flat at 10% per annum.

a) The firm wants to fully fund and immunize its obligation to the customer with zero-coupon bonds. What maturity bonds must it purchase?

b) What must be the total market value and the face value of the zero-coupon bonds?

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