Choosing the Right Bond for Liability Immunization

John is a portfolio manager overseeing a pension fund with significant liabilities scheduled to be paid out over the next 10 years. He is considering an immunization strategy to ensure that the fund's assets will be sufficient to meet these future liabilities. To implement an effective immunization strategy, John is evaluating the duration and convexity of various fixed income securities.

In particular, he has the following options available:

• A 10-year zero-coupon bond
• A 10-year coupon bond with a 6% annual coupon rate
• A 15-year coupon bond with a 4% annual coupon rate

Given the need to immunize the liabilities, which bond should John select to maximize the effectiveness of his immunization strategy?