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A pension fund has an obligation to pay an annuity of $10,000 per year for the next 20 years. The fund has a portfolio of

A pension fund has an obligation to pay an annuity of $10,000 per year for the next 20 years. The fund has a portfolio of assets worth $150,000 with a duration of 5 years. Interest rates are expected to fall by 1% and the current yield curve is as follows:

Maturity (years)Yield (%)
12.5
23.0
33.5
44.0
54.5
65.0

Calculate the change in the market value of the pension fund's assets and liabilities if interest rates fall by 1%.

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