A firm has a liability of $10,000 in five years. The firm funds the liability by purchasing a bond redeemable at par. The bond pays annual coupons of 4% and is priced at $8,219.27 to yield a 4% annual effective yield. - Under scenario A, immediately after purchase of the bond, the interest rate for reinvesting the coupons falls to 3.70%. - Under scenario B, immediately after purchase of the bond, the interest rate for reinvesting the coupons rises to 4.30%. Find the dollar amount of profit or loss under the two scenarios. (A) A: 0 profit. B: 0 profit (B) A: 14.34 loss. B: 14.51 profit. (C) A: 10.64 loss. B: 10.71 profit. (D) A: 10.71 profit. B: 10.64 loss. (E) A: 14.51 profit. B: 14.34 loss. A firm has a liability of $10,000 in five years. The firm funds the liability by purchasing a bond redeemable at par. The bond pays annual coupons of 4% and is priced at $8,219.27 to yield a 4% annual effective yield. - Under scenario A, immediately after purchase of the bond, the interest rate for reinvesting the coupons falls to 3.70%. - Under scenario B, immediately after purchase of the bond, the interest rate for reinvesting the coupons rises to 4.30%. Find the dollar amount of profit or loss under the two scenarios. (A) A: 0 profit. B: 0 profit (B) A: 14.34 loss. B: 14.51 profit. (C) A: 10.64 loss. B: 10.71 profit. (D) A: 10.71 profit. B: 10.64 loss. (E) A: 14.51 profit. B: 14.34 loss