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1 A pension fund has an average duration of its liabilities equal to 16 years. The fund is looking at 5-year maturity zero-coupon bonds and

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1 A pension fund has an average duration of its liabilities equal to 16 years. The fund is looking at 5-year maturity zero-coupon bonds and 5% 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? ? 31.25% 68.75% 0 32.00% ? 21.00%

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