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A pension fund has an average duration of its liabilities equal to 10 years. The fund...

A pension fund has an average duration of its liabilities equal to 10 years. The fund is looking at 4-year maturity zero-coupon bonds and 18-year maturity zero-coupon bonds to immunize its interest rate risk. How much of its portfolio should it allocate to the 4-year zero-coupon bonds and 18-year maturity zero-coupon bonds to immunize if there are no other assets funding the plan?

A. 46%, 54%
B. 58%, 42%
C. 57%, 43%
D. 52%, 48%
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Ans: C. 57%, 43%

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