My pension plan will pay me $15,500 once a year for a 10-year period. The first payment will come in exactly five years. The pension fund wants to immunize its position.

Required:

1. What is the duration of its obligation to me? The current interest rate is 10.5% per year.

2. If the plan uses 5-year and 20-year zero-coupon bonds to construct the immunized position, how much money ought to be placed in each bond?

3. What will be the face value of the holdings in each zero?