You are facing an obligation with a present value
Question # 00393135
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Updated on: 09/22/2016 09:11 AM Due on: 09/22/2016
You are facing an obligation with a present value of $100000, duration 8 years, and convexity 24. You want to utilize an immunization strategy for this obligation, which exclusively involves three bonds: A,B and C. You calculated the following information for the three bonds:
Bond | Duration | Convexity |
A | 4 | 16 |
B | 12 | 20 |
C | 16 | 32 |
- How much money should you invest in each of the bonds with a duration matching immunization strategy?
- How much money should you invest in each three bonds with duration and convexity matched immunization strategy?
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Solution: You are facing an obligation with a present value