A pension plan must make total disbursements of $2.7 million, $3.7 million, and $2.7 million annually for the next three years, respectively. The fund makes these payments twice a year, paying half of each year's total amount six months into the year and the remaining half at the end of the year. Find the duration of the pension obligations if the term structure is flat at 10%.
A pension plan must make total disbursements of $2.7 million, $3.7 million, and $2.7 million annually for the next three years, respectively. The fund makes these payments twice a year, paying half of each year's total amount six months into the year and the remaining half at the end of the year. Find the duration of the pension obligations if the term structure is flat at 10%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A pension plan must make total disbursements of $2.7 million, $3.7 million, and $2.7 million annually for the next three years, respectively. The fund makes these payments twice a year, paying half of each year's total amount six months into the year and the remaining half at the end of the year.
Find the duration of the pension obligations if the term structure is flat at 10%.
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