23.

Question 23 2 pts Consider a pension fund with a $200M liability due in 25 years. The fund is worried about the interest rate risk of this liability. The fund can hedge this interest rate risk by purchasing assets with a duration equal to that of the liabilities. The pension fund manager has three zero-coupon securities as investment options: Bond A: 5 year, 0% coupon Bond B: 12 year, 0% coupon Bond C: 30 year, 0% coupon Which of the following proportionate investments in the various bonds will give the most effective hedge for the 25 year liability? O 100% in Bond O 100% in Bond B O 20% in Bond A, 80% in Bond C O 40% in Bond A, 60% in Bond C ond C: 30 year, 0% coupon Which of the following proportionate investments in the various bonds will give the most effective hed- for the 25 year liability? O 100% in Bond O 100% in Bond B O 20% in Bond A, 80% in Bond 40% in Bond A, 60% in Bondo O 80% in Bond A, 20% in Bond C O 60% in Bond A, 40% in Bond C The following information applies to the next 2 questions