The Managers of Reliable Life Insurance Company are considering hiring a consultant to advise them on portfolio immunization. Following are some of the statements that were made during these presentations:
Statement One: A great thing about immunization is that it is a set-and-forget strategy. That is, once you have immunized your portfolio, there is no subsequent work to be done.
Statement Two: If a portfolio is immunized against a change in the market yield at a given horizon by matching portfolio duration to horizon, the portfolio faces no risk except for default risk.
Statement Three: The liquidity of securities used to construct an immunized portfolio is irrelevant.
Statement Four: In general, the entire portfolio does not have to be turned over to rebalance an immunized portfolio. Furthermore, rebalancing need not be done on a daily basis.
a.
All of the above
b.
None of the above
c.
Statements two and four only
d.
Statement two only
e.
Statement four only