Contingent Immunization YTM Change Question

CFA Level III
#1

Hi everyone,

I hope everyone’s studies are going great.

Been going nuts trying to figure this out, hoping someone can please help me out (like Mr. S2000?) :slight_smile:

Fixed income book, P41, Contingent Immunization, it says if the YTM (immuunization rate) drops to 3.75%, the portfolio value will be $541.36, any idea how that $541.36 is calculated?

Thank you much!

#2

For that value you would use— FV 500 mill. IY- 1.875 (3.75/2) N- 20 (10 year note semi annual) Pmt- 11.875 (500*.0475/2)

541.36

#3
#4

Oh, and we are using the old YTM for the coupon rate because the coupons are fixed? I was confused using the new YTM to calculate the coupons…