Question: Consider a liability to pay off in exactly 3 years with a flat 12% rate but is to decline at 10%: Bond Actions A three

Consider a liability to pay off in exactly 3 years with a flat 12% rate but is to decline at 10%:

Bond

Actions

A

three year pure discount bond

B

Four year bond paying 33.20% annual coupon and sell in 3 years

Determine the risk or immunity value of Bond A and Bond B.

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