Question
City bank has six-year zero coupon bonds with a total face value of $20 million. The current market yield on the bonds is 10 percent.
City bank has six-year zero coupon bonds with a total face value of $20 million. The current market yield on the bonds is 10 percent. Suppose that during last year the mean change in daily yields on six-year zero-coupon bonds was 25 basis points, while the standard deviation was 30 basis points. Yield changes are assumed to be normally distributed (critical value = 1.96 for 95% confidence interval)
Question: Continue from #1, what is the daily earnings at risk (DEAR) of this bond portfolio?
|
| A. | $667,284.95 |
|
| B. | $517,263,38 |
|
| C. | $916,363.63 |
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| D. | $246,110.63 |
|
| E. | $749,021.12 |
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Financial Institutions Management A Risk Management Approach
Authors: Anthony Saunders, Marcia Cornett
7th Edition
0073530751, 9780073530758
