Person A has to immunize a series of payments going to customers in Year 1 $450,000...

Person A has to immunize a series of payments going to customers in Year 1 $450,000 , in Year 2 $350,000 Year 3 $600,000 The market yield for the cash flows corresponding to the required payments is 7%. Person A hires Person B to immunize the fund...Person B pursues an immunization strategy by investing in 1-year Zeroes and perpetuities, which have a yield of 9%.

A.What is the Duration of the pension fund?

B.What is the % of zeros will Person B suggest the Person A to invest?

C.What will percentage of perpetuities be?

Expert Solution

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