1 A financial institution has the following assets: • A portfolio of 10-year zero-coupon bonds with a face value of $22 million and currently yielding 7.6% • A €8 million trading position in spot euros, with the current exchange rate of $1.43/€ • A $16 million trading position in equities Calculate the DEAR for a portfolio of these three assets. The correlation coefficients are 0.27 for the bonds and the euros, -0.24 for the bonds and the equities, and 0.33 for the equities and the euros.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A financial institution has the following assets:

• A portfolio of 10-year zero-coupon bonds with a face value of $22 million and currently yielding 7.6%

• A €8 million trading position in spot euros, with the current exchange rate of $1.43/€

• A $16 million trading position in equities

Calculate the DEAR for a portfolio of these three assets. The correlation coefficients are 0.27 for the bonds and the euros, -0.24 for the bonds and the equities, and 0.33 for the equities and the euros.

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