A pension plan must make total disbursements of $4.7 million, $6.7 million, $5.7, $3.0 and $1.0 million annually for the next five 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 spot rates are flat at 8%. Group of answer choices 1.91 3.86 4.76 2.00 2.17

A pension plan must make total disbursements of $4.7 million, $6.7 million, $5.7, $3.0 and $1.0 million annually for the next five 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 spot rates are flat at 8%. Group of answer choices 1.91 3.86 4.76 2.00 2.17

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 44P

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Concept explainers

Types of Insurance Contract

Insurance is a contract wherein an individual or entity gets financial protection from the insurance company for any damages or losses incurred. The individual or entity is called the insured, whereas the insurance company is called the insurer. The insured and the insurer enter a legal contract for a fixed term called the insurance term, and the contract is called an insurance policy.

Question

A pension plan must make total disbursements of $4.7 million, $6.7 million, $5.7, $3.0 and $1.0 million annually for the next five 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 spot rates are flat at 8%.

Group of answer choices

1.91

3.86

4.76

2.00

2.17

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