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  3. consider a pension fund that has to make a payment

Consider a pension fund that has to make a payment of $19,487 in seven years....

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Accounting

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Consider a pension fund that has to make a payment of $19,487 in seven years. The interest rate is 10%. The present value of this obligation is $10,000. The manager decides to fund this obligation using a five year zero-coupon bond and a perpetuity paying an annual coupon 8.93%. How can he construct an immunized portfolio? O He will put 27.78% in the five year zero bond and 72.21% in the perpetuity. He will put 66.66% in the five year zerokvond and the rest in the perpetuity . O He will put 50% in the five year zero bond and 50% in the perpetuity. O He will put 72.21% in the five year zero bond and the rest in the perpetuity

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