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With the objective of immunizing an obligation, a financial manager decides to invest in a portfolio of 2 bonds. A zero coupon bond which matures exactly 3 years from now and a 10% coupon bond

With the objective of immunizing an obligation, a financial manager decides to invest in a portfolio of 2 bonds. A zero coupon bond which matures exactly 3 years from now and a 10% coupon bond (coupons are paid annually) that matures exactly 2 years from now and that has a duration of 1.912. Assume the yield to maturity is 6% and the convexity of the coupon bond is 5.1. What does this mean and what are the implications? (Illustrate your answer with some calculations)

Apr 19 2021 View more View Less

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