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You want to invest $100 in a project whose cash flows have a duration of 4 years. You invest $10 of your own money and
You want to invest $100 in a project whose cash flows have a duration of 4 years. You invest $10 of your own money and you borrow the rest by issuing 2-year notes with duration of 1.25 years and 7-year notes with duration of 6.5 years. Each note has a face value of $1. The unit price of each 7-year note is $1.20. What percent of the market value of liabilities should come from the 2-year notes?
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