A pension plan is obligated to make disbursements of 15 mill

A pension plan is obligated to make disbursements of $1.5 million, $2.5 million, and $1.5 million at the end of each of the next three years respectively. Find the duration of the plan\'s obligations if the interest rate is 9% annually. (Do not round intermediate calculations. Round your answer to 4 decimal places.) Duration years References eBook & Resources Worksheet Learning Objective: 11- 02 Compute the duration of bonds, and use duration to measure interest rate sensitivity O Type here to search Af

Solution

Duration = 9.06/4.64 = 1.9530 years

Discount rate	9.0000%
Cash flows*n	Year	Discounted CF= cash flows/(1+rate)^year	Cumulative cash flow
-	0	-	-
1.500	1	1.38	1.38
5.000	2	4.21	5.58
4.500	3	3.47	9.06