What is duration of its obligation to me if the yield curve

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Reference no: EM133401517

Question: A pension plan will pay me $10,000 per year for an 8-year period, starting next year. My pension fund wants to immunize its position.

a) What is the duration of its obligation to me if the yield curve is flat at 10%?

b) If the pension fund uses 2-year and 16-year zero coupon bonds to construct the immunized position, how much money ought to be placed in each bond?

Reference no: EM133401517

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