Pension funds pay lifetime annuities to recipients. If a firm remains 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 $2.3 million per year to beneficiaries. The yield to maturity on all bonds is 20%.

a. If the duration of 5-year maturity bonds with coupon rates of 16% (paid annually) is 3.7 years and the duration of 20-year maturity bonds with coupon rates of 10% (paid annually) is 6.2 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?

	Holdings
5 year bond	$___________ million
20 year bond	$___________ million

b. What will be the par value of your holdings in the 20-year coupon bond? (Enter your answer in dollars not in millions. Do not round intermediate calculations. Round your answer to the nearest dollar amount.)

Par value:_______ $