Can you please do all parts Pension funds pay lifetime annuities...
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Can you please do all parts
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 $2.6 milion per year to beneficiaries. The yield to maturity on all bonds is 11.5%. Required: a. If the duration of 5-year-maturity bonds with coupon rates of 12.6% (paid annually) is four years and the duration of 20 -year-maturity bonds with coupon rates of 4% (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
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