Consider a French investment fund that has a €250 million position in a 96-year Austrian government bond. This bond has a 2.10% coupon rate, a par value of €100, an annual Coupon payment frequency and a 0.75% yield. How much would the fund lose if the yield for this bond increased by 100 basis points to 1.75%? Explain your answer clearly.
Consider a French investment fund that has a €250 million position in a 96-year Austrian government bond. This bond has a 2.10% coupon rate, a par value of €100, an annual Coupon payment frequency and a 0.75% yield. How much would the fund lose if the yield for this bond increased by 100 basis points to 1.75%? Explain your answer clearly.
Chapter21: International Cash Management
Section: Chapter Questions
Problem 18QA
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![Question 1
Consider a French investment fund that has a €250 million position in a 96-year Austrian
government bond. This bond has a 2.10% coupon rate, a par value of €100, an annual
coupon payment frequency and a 0.75% yield. How much would the fund lose if the yield
for this bond increased by 100 basis points to 1.75%? Explain your answer clearly.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe0425e4f-ec30-4176-b91d-cb86861fe4ed%2F08146a25-8524-4c4e-bfc7-ff45adf458c2%2F6deajbi_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 1
Consider a French investment fund that has a €250 million position in a 96-year Austrian
government bond. This bond has a 2.10% coupon rate, a par value of €100, an annual
coupon payment frequency and a 0.75% yield. How much would the fund lose if the yield
for this bond increased by 100 basis points to 1.75%? Explain your answer clearly.
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