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Unsure if D is correct.. The following bonds and liabilities are given: Bond A: A zero-coupon bond with a face value of $100 and a
Unsure if D is correct..
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 4 years. Bond B: A zero-coupon bond with a face value of $100 and a time to maturity of 17 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? Select one: A. Reinvestment risk: and she is concerned about potential interest rate decrease at the end of year 4 B. Reinvestment risk: and she is concerned about potential interest rate increase at the end of year 4 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 E. Both reinvestment risk and liquidity risk: and she is concerned about no inStep by Step Solution
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