You manage a pension fund that will provide retired workers with lifetime annuities. You determine that...

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Finance

You manage a pension fund that will provide retired workers withlifetime annuities. You determine that the payouts of the fund areessentially going to resemble level perpetuities of $1 million peryear. The interest rate is 10%. You plan to fully fund theobligation using 5-year and 20-year maturity zero-couponbonds.
a. How much market value of each ofthe zeros will be necessary to fund the plan if you desire animmunized position? (Do not round intermediatecalculations. Enter your answers in millions.)
Market Value
Five-year $  million
Twenty-year $  million
b. What must be the face value of thetwo zeros to fund the plan? (Do not round intermediatecalculations. Enter your answers in millions rounded to 2 decimalplaces.)
Face Value
Five-year $  million
Twenty-year $  million

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You manage a pension fund that will provide retired workers withlifetime annuities. You determine that the payouts of the fund areessentially going to resemble level perpetuities of $1 million peryear. The interest rate is 10%. You plan to fully fund theobligation using 5-year and 20-year maturity zero-couponbonds.a. How much market value of each ofthe zeros will be necessary to fund the plan if you desire animmunized position? (Do not round intermediatecalculations. Enter your answers in millions.)Market ValueFive-year$ millionTwenty-year$ millionb. What must be the face value of thetwo zeros to fund the plan? (Do not round intermediatecalculations. Enter your answers in millions rounded to 2 decimalplaces.)Face ValueFive-year$ millionTwenty-year$ million