Pension funds pay lifetime annuities to recipients. If firm remains in business indefinitely, the pension obligation will resemble a perpetuity Suppose, thereforethat you are managing a pension fund with obligations to make perpetual payments per year beneficianes . The yield to maturity on all bonds is 20% the duration of 5year 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 7% (paid annually is 6.5 years, how much of each of these coupon bonds in market value) you want to to both fully fund and immunize your obligation(Do not round intermediate calculations. Enter your answers in millions rounded to 1 decimal place.)

6 Pension funds pay lifetime annuities to recipients. If a firm remains 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 $21 million per year to beneficiaries. The yield to maturity on all bonds is 20% 10 points a. If the duration of 5-year maturity bonds with coupon rates of 16% (paid annually) is 37 years and the duration of 20-year maturity bonds with coupon rates of 7% (paid annually) is 6.5 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? (Do not found intermediate calculations. Enter your answers in millions rounded to 1 decimal place.) eBook Holdings million million 5-year bond 20-year bond Print c References 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 the nearest dollar amount.) Par value