What would happen to the pension funds net position

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Reference no: EM132014181

Suppose a pension fund must make a payment of Euro 100,000 at the end of each of the next three years and they wish to immunise this obligation against future interest rate changes using zero coupon bonds.

Interest rates are currently 8%. What maturity zero-coupon bond would immunise the pension fund's obligation?

If interest rates were to immediately increase to 9% after immunisation, illustrate what would happen to the pension fund's net position.

Reference no: EM132014181

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