AUF has been directed to pursue a contingent immunization strategy for a portfolio MV $100. Trustees not wiling to accept below 6% return for 5 years the length of time when liability must be paid. Trustees stated that belive an immunization rate of 8% is attainable in today’s market. Portfolio manager has decided to implement this strategy by purchasing $100 mil in 10 years bonds with an annual coupon bond of 8% semiannually

- Assuming an immediate (today) increase in the immunized rate to 11%, the portfolio reuired return that would most likely make Price turn to an immunization strategy is closest to:

a) 11%

b) 11.7%

c) 12.5%