Suppose you're managing a pension fund and you are interested in immunizing the following 7 year obligation: 0 | Year | Cash Flow | 1 $100,000 2 $135,000 3 $160,000 4 $200,000 5 $280,000 6 $375,000 7 $400,000 Today, at t=0, you have access to only two bonds: Bond A, a zero-coupon bond with yield to maturity of 10%, three years to maturity, and face value $1,000; and Bond B, a 8% coupon (annual) with yield to maturity of 10%, 15 years to maturity, and face value $1,000. Obligation's opportunity cost of capital is also 10%. Questions: 1) At t=0, what are the durations of Obligation, Bond A and Bond B? 2) At t=0, what % of your portfolio has to be in Bond A and Bond B, so as to immunize the obligation? How many bonds A and Bonds B does this imply buying at t=0? 3) Assuming flat yield curve, i.e. yields not changing at all, at t=1, what are the new durations of Obligation, Bond A and Bond B? 4) Assuming flat yield curve, i.e. yields not changing at all, at t=1, what actions need to be taken to rebalance the portfolio so as to again fully immunize the obligation, now at t=1