FIXY has assets of $2 million invested in a 25-year, 6 percent annual coupon Treasury bond selling at par. The assets are financed with equity and a $ 1700000, 4-year, 3 percent annual coupon capital note selling at par. What is the leverage adjusted duration gap of FIXY? What is the impact on equity value if the relative change in all market interest rates is AR/(1+R /2)=0.003?
FIXY has assets of $2 million invested in a 25-year, 6 percent annual coupon Treasury bond selling at par. The assets are financed with equity and a $ 1700000, 4-year, 3 percent annual coupon capital note selling at par. What is the leverage adjusted duration gap of FIXY? What is the impact on equity value if the relative change in all market interest rates is AR/(1+R /2)=0.003?
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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FIXY has assets of $2 million invested in a 25-year, 6 percent annual coupon Treasury bond selling at par. The assets are financed with equity and a $ 1700000, 4-year, 3 percent annual coupon capital note selling at par. What is the leverage adjusted duration gap of FIXY? What is the impact on equity value if the relative change in all market interest rates is AR/(1+R /2)=0.003?
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