Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble perpetuity....

9. Pension funds pay lifetime annuities to recipients. If a firm will remain in business indefinitely, the pension obligation will resemble perpetuity. Suppose, therefore, that you are managing a pension fund with obligations to make perpetual payments of $2 million per year to beneficiaries. The yield to maturity on all bonds is 16%.

(b) What will be the par value of your holdings in the 20-year coupon bond? 

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