Pension plan is obligated to make disbursements

Assignment Help Financial Management

Reference no: EM13876248

a) A pension plan is obligated to make disbursements of $1 million, $2 million, $5 million and $1 million at the end of each of the next four years, respectively. Find the duration of the plan’s obligations if interest rates are flat at 10% annually.

b) If the plan in the previous question wants to fully fund and immunise 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: EM13876248

Questions Cloud

Future value of this cash flow stream : If you receive $2,590 at the end of each year for the first three years and $627 at the end of each year for the next two years. What is the future value of this cash flow stream? Assume interest rate is 6%.

Price variance for variable overhead : Fargo Corporation reported a $800 favorable price variance for variable overhead and a $8,000 favorable price variance for fixed overhead.

Find the present value of the ordinary annuities : Find the present value of the following ordinary annuities: PV of $300 each six months for five years at a simple rate of 12 percent, compounded semi annually

Difference between goalpost and absolute quality conformance : Discuss the difference between goalpost conformance and absolute quality conformance. Taguchi argues that being within specification limits is not enough to be competitive in today's global economy. Do you agree? Why?

Pension plan is obligated to make disbursements : A pension plan is obligated to make disbursements of $1 million, $2 million, $5 million and $1 million at the end of each of the next four years, respectively. Find the duration of the plan’s obligations if interest rates are flat at 10% annually.

Calculate the range of local oscillator frequency : A super heterodyne receiver has if IF of ( MHz and tunes the frequency range from 50 to 60 MHz. The mixer uses low-side injection of the local oscillator signal. Calculate the range of local oscillator frequency.

Mail-order pharmaceutical business on the west coast : Drugs 'R Us operates a mail-order pharmaceutical business on the West Coast. The firm receives an average of $642,000 in payments per day. On average, it takes 7 days for the firm to receive payment, from the time customers mail their checks to the t..

Angular acceleration of the paper roll : In a continuous printing process paper is drawn into the presses at a constant speed v Denoting by r the radius of the paper roll at any given time and by b the thickness of the paper, derive an expression for the angular acceleration of the paper..

What is the companys new required rate of return : Porter Plumbing's stock had a required return of 10.50% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Then an increase in investor risk aversion caused the market risk premium to rise by 2%. The risk-free rate an..

User Account

All Pages