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Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that

Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that you are managing a pension fund with obligations to make perpetual payments of $1.9 million per year to beneficiaries. The yield to maturity on all bonds is 19.0%.
Required:
a. If the duration of 5-year-maturity bonds with coupon rates of 11.8%(paid annually) is four years and the duration of 20-year-maturity bonds with coupon rates of 7%(paid annually) is 11 years, how much of each of these coupon bonds (in market value) will you want to hold to both fully fund and immunize your obligation?
Note: Do not round intermediate calculations. Enter your answers in millions rounded to 2 decimal places.
b. What will be the par value of your holdings in the 20-year coupon bond?
Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.
\table[[a.5 year bond,,million],[a.20 year bond,,million],[b. Par value,,million]]
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