Assume the yield curve is flat and any interest rate shifts are parallel. Suppose your portfolio has some assets and some liabilities, with the present value of the assets equal to the present value of the liabilities, but the duration of the assets does not equal the duration of the liabilities. That is, your portfolio is not properly immunized. What can we say will happen as a result? O a. We don't have enough information to support any of these statements b. Any small change in the interest rate will lower your portfolio's value С. A small change in the interest rate in one direction will raise your portfolio's value, while a small change ini the other direction will lower your portfolio's value d. If the interest rate falls at all, your portfolio will lose value If the interest rate rises at all, your portfolio will lose value е.
Assume the yield curve is flat and any interest rate shifts are parallel. Suppose your portfolio has some assets and some liabilities, with the present value of the assets equal to the present value of the liabilities, but the duration of the assets does not equal the duration of the liabilities. That is, your portfolio is not properly immunized. What can we say will happen as a result? O a. We don't have enough information to support any of these statements b. Any small change in the interest rate will lower your portfolio's value С. A small change in the interest rate in one direction will raise your portfolio's value, while a small change ini the other direction will lower your portfolio's value d. If the interest rate falls at all, your portfolio will lose value If the interest rate rises at all, your portfolio will lose value е.
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
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume the yield curve is flat and any interest rate shifts are parallel.
Suppose your portfolio has some assets and some liabilities, with the present value of the assets
equal to the present value of the liabilities, but the duration of the assets does not equal the
duration of the liabilities. That is, your portfolio is not properly immunized.
What can we say will happen as a result?
a.
We don't have enough information to support any of these statements
b. Any small change in the interest rate will lower your portfolio's value
A small change in the interest rate in one direction will raise your portfolio's value, while a small change ini
the other direction will lower your portfolio's value
С.
d. If the interest rate falls at all, your portfolio will lose value
е.
If the interest rate rises at all, your portfolio will lose value
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