Year Payment Pv of PMT Wt of Pmt (1)*Col.

H
1 24 $22.43 0.21025 0.21025
2 28 $24.46 0.229245 0.45849
3 34 $27.75 0.260158 0.780473
4 42 $32.04 0.300347 1.201388

$106.68 1 2.650602

So, Present value of liability = 106.68

Duration of liability = 2.65 years

Duration of perpetuity = 2.734 (Refer column L->P for calcualtion

Let X = wt of zeros

1-x = wt of perpetuities

x + (1-x) (1.07/0.07) = 2.650602

14.29x= 12.635 12.635
x= 0.884

so, x= 0.884 means

106.68*0.884 M must be placed in zero coupon and remainder in perpetuities

so, 94.30512 M in zero coupon

12.37488 M ins perpetuties
 Pv of Perpetuity Wt of Pmt (1)*Column N
342.8571 0.1875 0.1875
400 0.21875 0.4375
485.7143 0.265625 0.796875
600 0.328125 1.3125

1828.571 1 2.734375

or calcualtion