Question: A pension fund must make two fixed payments (2 liabilities): a first payment of $300 due in 5 years and a second payment of $750

A pension fund must make two fixed payments (2 liabilities): a first payment of $300 due in 5 years and a second payment of $750 due in 10 years. The current market interest rate is 3% at all maturities. The fund has $1,000 available to invest today. The fund can allocate its assets between 5-year zero-coupon notes and 20-year zero-coupon bonds. Each bond and note has a face value of $1. The fund wants to stabilize its equity/assets ratio. What is the initial equity value of the fund?

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