As corporate treasurer, you have to pay $19 million in one year and again in...
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Finance
As corporate treasurer, you have to pay $19 million in one year and again in two years. Bonds of all maturities currently yield 8%.
Duration of the liability is 1.48
If you buy zero-coupon bonds with a maturity equal to the duration calculated in the previous part, what should be their combined face value (in $)?
If interest rates suddenly go up to 9%, what is your immediate funding surplus (positive number) or shortfall (negative number) (in $)? Use the exact duration, not the rounded one shown as solution to part 1.
If interest rates suddenly go down to 7%, what is your immediate funding surplus (positive number) or shortfall (negative number) (in $)? Use the exact duration, not the rounded one shown as solution to part 1.
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