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Asset 1, a long position in a bond that makes semi-annual coupon payments and returns...

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Accounting

Asset 1, a long position in a bond that makes semi-annual coupon payments and returns the principal at maturity.

- face value: $75 million

- maturity: 15 years

- coupon rate: 6%

- yield to maturity: 5%

Asset 2, a short position in a zero coupon bond that has

-fave value: $150 million

- maturity 12 years

- yield to maturity: 6%

Asset 3, a long position in an amortized loan that has

- face value $50 million

- maturity: 10 years

- interest rate: 7%

- yield to maturity 8%

Compute the value and modified duration of each asset from questions 1-3.

Compute the value and modified duration of the financial institutions debt portfolio.

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