Question
You are managing NYU's pension fund. In a perhaps irrational decision, the Math Department has chosen to run a separate pension with an unusual pi-themed
You are managing NYU's pension fund. In a perhaps irrational decision, the Math Department has chosen to run a separate pension with an unusual pi-themed distribution of payments. Your fund's liabilities for this Pi-Pension are:
Year | Cash Flow |
1 | $3M |
2 | $1M |
3 | $4M |
4 | $1M |
5 | $5M |
By coincidence, yields at all maturities are currently equal to the mathematical constant tau (defined as two times pi), meaning that all yields and spot rates are equal to 6.28%.
You are very happy that you immunized the portfolio since over the next year yields decrease by 1% (to 5.28%) at all horizons. Compute the holding period return on your 5-year zero-coupon bonds over this one-year horizon.
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