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A pension fund anticipates needing to pay out $3 million dollars in benefits in 2025...

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Finance

A pension fund anticipates needing to pay out $3 million dollars in benefits in 2025 (five years from today).Assume the yield curve is a flat 5%. It has two options for bonds in which to invest: a zero coupon Treasury bond with a time to maturity of 11 years and YTM of 3%, and a zero coupon Johnson & Johnson bond with 4 years to maturity and a 6% YTM. They want zero interest rate risk. How much money should they invest in the Treasury? Note: Answer in dollars, rounding to the nearest cent.

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