Suppose you have the following liabilities: Liability 1: A one-time liability maturing in 4 years with the present value of $100. Liability 2: A one-time liability maturing in 8 years with the present value of $100. To immunize your liabilities using the following two bonds, what would be the weights of the two bonds in your immunizing bond portfolio? Bond A: A zero-coupon bond with a face value of $100 and a time to maturity of 3 years. Bond B: A zero-coupon bond with a face value of $100 and a time to maturity of 12 years.
Suppose you have the following liabilities:
Liability 1: A one-time liability maturing in 4 years with the
Liability 2: A one-time liability maturing in 8 years with the present value of $100.
To immunize your liabilities using the following two bonds, what would be the weights of the two bonds in your immunizing bond portfolio?
Bond A: A zero-coupon bond with a face value of $100 and a time to maturity of 3 years.
Bond B: A zero-coupon bond with a face value of $100 and a time to maturity of 12 years.
A.
33% in Bond A and 67% in bond B
B.
70% in Bond A and 30% in bond B
C.
30% in Bond A and 70% in bond B
D.
67% in Bond A and 33% in bond B
E.
50% in Bond A and 50% in bond B
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