Question
Consider a corporate bond with 10 years until maturity, trading at par (M=100,000). The modified duration of this bond is 14.2 periods. Also consider a
Consider a corporate bond with 10 years until maturity, trading at par (M=100,000). The modified duration of this bond is 14.2 periods. Also consider a Treasury bond with 7 years until maturity. The modified duration of the Treasury bond is 11.3 periods. Suppose you want to buy the corporate bond and hedge it with a short position in the Treasury bond, what is the market value of your short position?
| A. | 113,638 | |
| B. | 143,183 | |
| C. | 125,664 | |
| D. | 100,000 |
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Principles Of Managerial Finance
Authors: Lawrence J. Gitman, Chad J. Zutter
13th Edition
9780132738729, 136119468, 132738724, 978-0136119463
