A company has a liability of 100 at time 1 and another liability of 75 at time 6.

The company invests in 2 assets to meet these liabilities. The 1^st asset provides a cash flow of A at time 0 and the 2^nd asset provides a cash flow of B at time 4. At an annual effective interest rate of 6%, the 1^st 2 conditions of Redington immunization are satisfied (with respect to price and duration).

Compute the sum A + B and state whether the 3^rd condition of Redington immunization (with respect to convexity) is satisfied.

Options are: 175 and not satisfied

174.22 and not satisfied

174.22 and satisfied

173.59 and not satisfied

173.59 and satisfied.