I am working on the following assignment and have troubles with question 2. First what i did was calculate the duration of Bond J at 6.04 yrs and calculated bond K duration at 17.66 years. Next i used the following formula to calculate the weights:

w x D1 + (1 - w) x D2 = 22

I am not sure i am doing this correctly though and need some guidance on the steps i am taking. Thanks.

Here is the question:

Consider a pension plan that pays beneficiaries in the following manner: at the end of the retirement year of a beneficiary the value of all benefits are transferred to his or her personal account. This means that at the end of every year the pension plan makes lump-sum payments of pension benefits to its beneficiaries. The pension plan's actuarial team concluded that the pension's obligation stream could not be estimated beyond an 80-year horizon. They further estimate that the plan will have to make annual pension payments of $10 million per year throughout this 80-year horizon. The first payment will take place in exactly one year. Assume the current yield curve is flat at 6%.

Note: In your calculations, use dollar figures rather than millions of dollars.

2)Assume that the pension plan hired a new actuarial team that revised the calculations in (1) and found that the present value of expected pension obligations in the next century is $150 million with a 22-year duration. You decide to utilize an immunization strategy for this obligation that exclusively involves two bonds J and K. Bond J is a 7-year bond paying a 5% annual coupon (annually). Bond K is a consol (perpetual) bond paying 10% annual coupon rate (annually). Both bonds have a 1,000 face value. How much money should the pension plan invest in each of the two bonds? Indicate the position the plan takes in each bond (long or short).