D6 Consider Portfolio P which is composed of some long positions in Bond 1 and some short positions in Bond 2 such that the value of the portfolio is zero. If the yield curve shifts up, does the value of Portfolio P: (i) increase; (ii) decrease; (iii) does not change; (iv) may either increase or decrease
D6 Consider Portfolio P which is composed of some long positions in Bond 1 and some short positions in Bond 2 such that the value of the portfolio is zero. If the yield curve shifts up, does the value of Portfolio P: (i) increase; (ii) decrease; (iii) does not change; (iv) may either increase or decrease
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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D6
Consider Portfolio P which is composed of some long positions in Bond 1 and some short positions in Bond 2 such that the value of the portfolio is zero. If the yield curve shifts up, does the value of Portfolio P: (i) increase; (ii) decrease; (iii) does not change; (iv) may either increase or decrease
Transcribed Image Text:Coupon rate
0%
Face value
Price
€ 100
€ 100
Maturity
1 year
2 years
€ 99.01
€ 107.88
Bond 1
Bond 2
5%
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