Zero coupon bonds to immunize


A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero coupon bonds and four percent yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero coupon bonds to immunize, if there are no other assets funding the plan?

a- 52%

b- 48%

c- 33%

d- 25%

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Accounting Basics: Zero coupon bonds to immunize
Reference No:- TGS086782

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