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You are to design for a small pension fund a bond portfolio to fund a $10 million obligation due in 4 years. The fund managers would like to use a 2-year zero along with an 8-year zero to fund the obligation. Currently, the yield curve is flat at around 5% for all maturities. Suppose that immediately after you set up the portfolio, the yield curve shifts to 6% at all maturities.

1. Is there any change to the $10 million obligation for the pension fund, if so what is it?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92649799

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