Question
A client Colin Limited's pension plan obligation has a duration of 15 and a convexity of 20. Colin's immunization strategy will use 3 bonds, issued
A client Colin Limited's pension plan obligation has a duration of 15 and a convexity of 20. Colin's immunization strategy will use 3 bonds, issued by firms named Eleonore, Frissel, and Greta, respectively.
The bonds have the following parameters:
| Bond | Duration | Convexity | ||
| Eleonore | 9.00 | 29.00 | ||
| Frissel | 18.00 | 36.00 | ||
| Greta | 21.00 | 48.00 |
What weights should Ms. Thompson recommend for Colin's strategy?
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Principles of Corporate Finance
Authors: Richard Brealey, Stewart Myers, Franklin Allen
13th edition
1260013901, 1260565553, 978-1260013900
