Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble a perpetuity. Suppose, therefore, that you are managing a pension fund with obligations to make perpetual payments of $1.7 million per year to beneficiaries. The yield to maturity on all bonds is 18.0%. a. If the duration of 5-year maturity bonds with coupon rates of 8.0% (paid annually) is four years and the duration of 20-year maturity bonds with coupon rates of 3% (paid annually) is 11 years, how much of each of these coupon bonds (in market value) will you want to hold to both fully fund and immunize your obligation?
b. What will be the par value of your holdings in the 20-year coupon bond?

scenario: hawaii and south carolina are trading partners. hawaii has an absolute advantage in the production of both coffee and tea. the opportunity cost of producing 1 pound of tea in hawaii is 2 pounds of coffee, and the opportunity cost of producing 1 pound of tea in south carolina is 1/3 pound of coffee. which of the following statements is true? a. south carolina should specialize in the production of both tea and coffee. b. hawaii should specialize in the production of tea, whereas south carolina should specialize in the production of coffee. c. hawaii should specialize in the production of coffee, whereas south carolina should specialize in the production of tea. d. hawaii should specialize in the production of both tea and coffee.