Consider a 529 (college savings) plan that will pay $20,000 once a year for a 4-year period (4 annual payments). The first payment will come in exactly 5 years (at the end of year 5) and the last payment in 8 years (at the end of year 8). What is the duration of the pension obligation? The current interest rate is 8% per year for all maturities.
Consider a 529 (college savings) plan that will pay $20,000 once a year for a 4-year period (4 annual payments). The first payment will come in exactly 5 years (at the end of year 5) and the last payment in 8 years (at the end of year 8). What is the duration of the pension obligation? The current interest rate is 8% per year for all maturities.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Consider a 529 (college savings) plan that will pay $20,000 once a year for a 4-year period (4
annual payments). The first payment will come in exactly 5 years (at the end of year 5) and the
last payment in 8 years (at the end of year 8).
What is the duration of the pension obligation? The current interest rate is 8% per year
for all maturities.
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