27. In Section 26-6, we stated that the duration of Pottertons lease equals the duration of its...

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27. In Section 26-6, we stated that the duration of Potterton’s lease equals the duration of its debt.

a. Show that this is so.

b. Now suppose that the interest rate falls to 3%. Show how the value of the lease and the debt are now affected by a .5% rise or fall in the interest rate. What would Potterton need to do to reestablish the interest rate hedge?

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Principles Of Corporate Finance

ISBN: 9780071314176

10th Global Edition

Authors: Richard Brealey

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Question Posted: Jul 27, 2024 11:01 AM

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27. In Section 26-6, we stated that the duration of Pottertons lease equals the duration of its...

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Principles Of Corporate Finance

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