Pension funds pay lifetime annuities to recipients. If a firm remains in business indefinitely, the pension...

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Pension funds pay lifetime annuities to recipients. If a firmremains in business indefinitely, the pension obligation willresemble a perpetuity. Suppose, therefore, that you are managing apension fund with obligations to make perpetual payments of $2.9million per year to beneficiaries. The yield to maturity on allbonds is 20%. a. If the duration of 5-year maturity bonds withcoupon rates of 16% (paid annually) is 3.7 years and the durationof 20-year maturity bonds with coupon rates of 10% (paid annually)is 6.2 years, how much of each of these coupon bonds (in marketvalue) will you want to hold to both fully fund and immunize yourobligation? (Do not round intermediate calculations. Enter youranswers in millions rounded to 1 decimal place.) Holdings 5-yearbond $ million 20- year bond $ million b. What will be the parvalue of your holdings in the 20-year coupon bond? (Enter youranswer in dollars not in millions. Do not round intermediatecalculations. Round your answer to the nearest dollar amount.) Parvalue $

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Pension funds pay lifetime annuities to recipients. If a firmremains in business indefinitely, the pension obligation willresemble a perpetuity. Suppose, therefore, that you are managing apension fund with obligations to make perpetual payments of $2.9million per year to beneficiaries. The yield to maturity on allbonds is 20%. a. If the duration of 5-year maturity bonds withcoupon rates of 16% (paid annually) is 3.7 years and the durationof 20-year maturity bonds with coupon rates of 10% (paid annually)is 6.2 years, how much of each of these coupon bonds (in marketvalue) will you want to hold to both fully fund and immunize yourobligation? (Do not round intermediate calculations. Enter youranswers in millions rounded to 1 decimal place.) Holdings 5-yearbond $ million 20- year bond $ million b. What will be the parvalue of your holdings in the 20-year coupon bond? (Enter youranswer in dollars not in millions. Do not round intermediatecalculations. Round your answer to the nearest dollar amount.) Parvalue $