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. The following bonds and liabilities are given: Bond A: A zero-coupon bond with a face value of $100 and a time to maturity of
. The following bonds and liabilities are given: Bond A: A zero-coupon bond with a face value of $100 and a time to maturity of 3 years. Bond B: A zero-coupon bond with a face value of $100 and a time to maturity of 18 years. Liability X: A one-time liability maturing in 10 years with the present value of $100. Suppose you have the liability X and want to meet your liability by investing in bond A. Which of the following statements about the risk(s) that you will face is correct? . A. Reinvestment risk; and she is concerned about potential interest rate decrease at the end of year 3 B. Reinvestment risk; and she is concerned about potential interest rate increase at the end of year 3 C. Liquidity risk; and she is concerned about potential interest rate decrease at the end of year 10 D. Liquidity risk; and she is concerned about potential interest rate increase at the end of year 10 O E. Both reinvestment risk and liquidity risk; and she is concerned about no interest rate change at the end of year 10
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