The fair value of pension assets

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Reference no: EM132032264

Suppose that on 12/31/2017, the duration of Cummins’ U.S. pension liability was estimated at 12 years. Cummins wants its bond investments in the pension fund to hedge 100% of the PBO’s exposure to the discount rate. Using the PBO of $2,765 million, the fair value of pension assets of $3,166 million, and assuming fixed income securities are 68% of plan assets, what duration of fixed income securities need to be purchased.

Reference no: EM132032264

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