A pension plan is obligated to make disbursements of $3.0 million, $3.8 million,

Question

A pension plan is obligated to make disbursements of $3.0 million, $3.8 million, and $3.0 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.)

A pension plan is obligated to make disbursements of $3.0 million, $3.8 million, and $3.0 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.)

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Answer is 1.9473

Thanks.

Years PMT Present Value
Interest Factor (9%) Present Value
of Payment Weight of
Payment Years*Weight of Payment 1 3 0.9174 2.7522 0.3329035 0.332903525 2 3.8 0.8417 3.19846 0.3868827 0.773765431 3 3 0.7722 2.3166 0.2802138 0.840641277 8.26726 1.00000 1.947310233

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