You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are (approximately) level perpetuities of $1 million per year. The interest rate is 10%. You plan to fully fund the obligation using 5-year maturity and 20-year maturity zero-coupon bonds. How much market value of each of the zeros will be necessary to fund the plan if you desire an immunized position? 4 million for 5 year bond and 6 million of 20-year bond. 6 million for 5 year bond and 4 million of 20-year bond. 6.67 million for 5 year bond and 3.33 million of 20-year bond. O 3.33 million for 5 year bond and 6.67 million of 20-year bond.
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- You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the funds are going to closely resemble perpetuities of $1 million per year. The interest rate is 9% per year. You plan to fully fund the obligation using 5-year and 20-year maturity zero-coupon bonds. How much market value of each of the zero coupon bonds will be necessary to fund the plan if you desire an immunized position? Duration of a perpetuity is (1+y)/yMy pension plan will pay me $10,500 once a year for a 10-year period. The first payment will come in exactly five years. The pension fund wants to immunize its position. Required: a. What is the duration of its obligation to me? The current interest rate is 5.0% per year. b. If the plan uses 5-year and 20-year zero-coupon bonds to construct the immunized position, how much money ought to be placed in each bond? c. What will be the face value of the holdings in each zero? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the duration of its obligation to me? The current interest rate is 5% per year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Duration yearsMy pension plan will pay me $10,000 once a year for a 10-year period. The first payment will come in exactly five years. The pension fund wants to immunize its position. Required: a. What is the duration of its obligation to me? The current interest rate is 10% per year. b. If the plan uses 5-year and 20-year zero-coupon bonds to construct the immunized position, how much money ought to be placed in each bond? c. What will be the face value of the holdings in each zero? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the duration of its obligation to me? The current interest rate is 10% per year. Note: Do not round intermediate calculations. Round your answer to 4 decimal places. Duration 1.8583 years < Required A Required B
- My pension plan will pay me $11,500 once a year for a 10-year period. The first payment will come in exactly five years. The pension fund wants to immunize its position. Required: a. What is the duration of its obligation to me? The current interest rate is 6.0% per year. b. If the plan uses 5-year and 20-year zero-coupon bonds to construct the immunized position, how much money ought to be placed in each bond? c. What will be the face value of the holdings in each zero?Consider a pension plan that will pay $10,000 once a year for a 5-year period (5 annual payments). The first payment will come in exactly 5 years (at the end of year 5) and the last payment in 9 years (at the end of year 9). a. What is the duration of the pension obligation? The current interest rate is 9% per year for all maturities. b. To generate the scheduled pension payments, the pension fund wants to invest the present value of the future payouts in bonds and match the duration of its obligation in part a). If the fund uses 5-year and 10-year zero-coupon bonds to construct its investment position, how much money (dollar amount) ought to be placed in each bond now? What should be the total face value (not current market value) of each zero coupon bond held? c. Right after the fund made its investment outlined in part b), market interest rates for all maturities dropped from 9% p.a.to 8% p.a. Show that the investment position constructed in part b) can still approximately fund the…8) Special Retirement PlanYou set up a retirement plan where you will invest $20,000 per year in an account with a guaranteed rate of return of ? = 0.05. The plan requires that you start investing immediately at year t=0, and make fifteen (15) additional payments of $20,000 in years t=1, t=2, ..., t=10. You make 11 investments in total. a. What will be the value of this stream of investments in year t=50? b. What is the maximum you can withdraw per year over the twenty (20) year period from t=51, t=52, ..., t=70? You have to withdraw the same amount each year. c. What is the maximum that you can withdraw per year forever if you start to make withdrawals in year t=51. You have to withdraw the same amount each year. 19)
- d) If the pension fund you manage expects to have an inflow of $200 million 12 months from now what forward contract would you seek to enter into to lock in current interest rates? 30A.)Your client has just been given a lump sum payout from his pension plan. He wants to purchase an annuity contract that will provide him with payments of $50,000 per year for the next 20 years. If comparable investments pay 6% per year, how much should he pay for an annuity contract? B.) Your client has just been given a lump sum payout from his pension plan. He wants to purchase an annuity contract that will provide him with payments of $4,000 per month for the next 20 years. If comparable investments pay 6% per year, how much should he pay for an annuity contract?A pension fund must pay out $1 million next year, $2 million the following year, and then $3 million the year after that. If the discount rate is 8%, what is the duration of this set of payments?
- Assume that the Canada Pension Plan promises you $20,000 per year starting when you retire 45 years from today (the first $20,000 will come 45 years from now). If your discount rate is 7%, compounded annually, and you plan to live for 15 years after retiring (so that you will get a total of 16 payments, including the first one), what is the value today of Canada Pension Plan's promise? The value today of the Canada Pension Plan's promise is $ (Round to the nearest dollar.) View an example Get more help - Clear allNOTE: Provide a format and show your work (example: N = 6, PV = XXX, I = X%, etc.) It is now the year 2048 and you have amassed a retirement fund of $1.2 million. You want to retire in 13 years (year 2061). At the time, you plan to start withdrawing $20,000 per month.If your investment fund is invested at a 6.0 percent rate, how many months will it last you once you start to withdraw the money? (Assume monthly compounding. Do not round intermediate calculations and round your final answer to 2 decimal places.) Hint: draw a timeline to help visualize the problem.Assume that the Canada Pension Plan promises you $20,000 per year starting when you retire 45 years from today (the first $20,000 will come 45 years from now). If your discount rate is 7%, compounded annually, and you plan to live for 15 years after retiring (so that you will get a total of 16 payments, including the first one), what is the value today of Canada Pension Plan's promise? The value today of the Canada Pension Plan's promise is (Round to the nearest dollar.) View an example Get more help - CZA O Search + W e Clear all Incorrect: 0