Ipen, a pension fund, computes the duration of its liabilities, currently valued at $1.97 billion,
and comes to a figure of 33.02. Assuming parallel shifts in the yield curves, what is the % change
in the value of their liabilities given a 10 basis point change in yields?
To hedge against interest rate risks, Ipen decides to invest their money in 30-yr zeros currently
trading at a ytm of 8% p.a. How much of the 30-yr zeros will Ipen have to buy so that when
combined with their liabilities, the duration of the combined portfolio will be zero?
(Hint: think of liabilities as negative of assets, i.e. a position in liabilities is the same as
a short position in assets)