A. Find the present value of the $50,000 twenty-year annuity. At 10%, the answer is $425,678.
b. Find the duration of this annuity. This is easiest using the closed-form equation.
c. Find a package of the bonds that has this duration and this market value.

a. $425,678.

b. 20 years

c. net present value, bond yields, spot rates, and pension obligations.

Explanation:

a.

In order to find the present value we have to apply in the following formula

where

P = Present value of an annuity stream

PMT = Dollar amount of each annuity payment

r = Interest rate (also known as discount rate)

n = Number of periods in which payments will be made

Replacing values we have that

P = $425,678

b.

As written in the exercise, 20 years for a present value of $425,678

c.

The package of bonds can include net present value, bond yields, spot rates, and pension obligations.

answer; importance to people; or acceptance;

answercontrol is returned to method c;