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How much of its portfolio should allocate to one-year

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Problem 1: A pension plan is obligated to make disbursements of $2.0 million, $3.0 million, and $2.0 million at the end of each of the next three years, respectively. The annual interest rate is 11%. If the plan wants to fully fund and immunize its position, how much of its portfolio should it allocate to one-year zero-coupon bonds and perpetuities, respectively, if these are the only two assets funding the plan?

Reference no: EM132745472

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