One way that life insurance firms can hedge the risk created by offering whole-life insurance policies is by ________.

A) holding long-term bonds
B) holding equities
C) holding short-term bonds
D) exercising its right to terminate the policy

Whole-Life Insurance

A type of permanent life insurance policy that offers a death benefit alongside a savings account component, covering the insured for their entire life.

Long-Term Bonds

Debt securities with maturities typically longer than 10 years, offering regular interest payments and repayment of principal at maturity.

Life Insurance Firms

Companies that provide financial compensation to beneficiaries upon the death of the insured person.