Suppose the duration of the USA's liability from the question above is 16 years.

To hedge against changes in interest rate risk, the USA will buy a combination of:

i)Perpetual bonds

ii)30-year zero coupon bonds.

A discount rate for all investments is 8% per year.

What percentage of the USA's investment should be made in the 30-year coupon bonds if the USA wants to fully immunize their portfolio against interest rate risk? Chose the closest answer.

a)86%

b)26%

c)18%

d)15%

e)55%