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Bond Convexity of the Asset 12.026 Assets 5yr bond bought at a yield of 3.4% $550M (lending money) 12yr bond bought at a yield of 4% (lending money). Value Duration of the Asset 4,562 $800M 9.453 53.565 Liabilities Value Duration of the Liability 1.941 Convexity of the Liability 2.384 2yr bond sold at a yield of 2.4% (borrowing money) 4yr bond sold at a yield of 2.8% (borrowing money) $300M $500M 3.759 8.206

Bond Convexity of the Asset 12.026 Assets 5yr bond bought at a yield of 3.4% $550M (lending money) 12yr bond bought at a yield of 4% (lending money). Value Duration of the Asset 4,562 $800M 9.453 53.565 Liabilities Value Duration of the Liability 1.941 Convexity of the Liability 2.384 2yr bond sold at a yield of 2.4% (borrowing money) 4yr bond sold at a yield of 2.8% (borrowing money) $300M $500M 3.759 8.206

Essentials Of Investments
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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Bond Convexity of the Asset 12.026 Assets 5yr bond bought at a yield of 3.4% $550M (lending money) 12yr bond bought at a yield of 4% (lending money). Value Duration of the Asset 4,562 $800M 9.453 53.565 Liabilities Value Duration of the Liability 1.941 Convexity of the Liability 2.384 2yr bond sold at a yield of 2.4% (borrowing money) 4yr bond sold at a yield of 2.8% (borrowing money) $300M $500M 3.759 8.206
Transcribed Image Text:Bond Convexity of the Asset 12.026 Assets 5yr bond bought at a yield of 3.4% $550M (lending money) 12yr bond bought at a yield of 4% (lending money). Value Duration of the Asset 4,562 $800M 9.453 53.565 Liabilities Value Duration of the Liability 1.941 Convexity of the Liability 2.384 2yr bond sold at a yield of 2.4% (borrowing money) 4yr bond sold at a yield of 2.8% (borrowing money) $300M $500M 3.759 8.206
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