Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Managerial Finance

Authors: Lawrence J. Gitman, Chad J. Zutter

13th Edition

9780132738729, 136119468, 132738724, 978-0136119463

More Books

Students also viewed these Finance questions