A firm has liabilities with a present value of $5000, a Macaulay duration of 12, and a Macaulay convexity of 195. The firm uses Redington immunization to create a portfolio consisting of two of the following three zero-coupon bonds redeemable at par: Bend Maturity Effective Yield Par Value 1000 A 5 years 10 years 1000 1000 Find the dollar amounts invested in each bond. (a) 1000 in Bond A and 4000 in Bond B (b) 2000 in Bond A and 3000 in Bond C (c) 2666.67 in Bond A and 2333.33 in Bond C (d) 3000 in Bond B and 2000 in Bond C le) 4000 in bond B and 1000 in Bond C 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 $8219.27 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: 1434 loss, B: 1451 profit. c) A: 1064 loss. B: 1071 profit. (d) A: 1071 profit. B: 1064 loss. le) A: 1451 profit. B: 1434 loss. A firm has liabilities with a present value of $5000, a Macaulay duration of 12, and a Macaulay convexity of 195. The firm uses Redington immunization to create a portfolio consisting of two of the following three zero-coupon bonds redeemable at par: Bend Maturity Effective Yield Par Value 1000 A 5 years 10 years 1000 1000 Find the dollar amounts invested in each bond. (a) 1000 in Bond A and 4000 in Bond B (b) 2000 in Bond A and 3000 in Bond C (c) 2666.67 in Bond A and 2333.33 in Bond C (d) 3000 in Bond B and 2000 in Bond C le) 4000 in bond B and 1000 in Bond C 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 $8219.27 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: 1434 loss, B: 1451 profit. c) A: 1064 loss. B: 1071 profit. (d) A: 1071 profit. B: 1064 loss. le) A: 1451 profit. B: 1434 loss