On pg 37 of Book 4 it says: If the manager invests the entire $500 million in 4.75 percent, 10-year notes at par and the YTM (yield to maturity) immediately changes, what will happen to the dollar safety margin? If the YTM suddenly drops to 3.75 percent, the value of the portfolio will be $541.36 million. Based on my hp12c skills (or lack thereof), I get the new value of the portfolio to be 551, not 541. Can anyone clarify?
N=10
PMT= 0.0475x500,000,000
FV= 500,000,000
I/Y: 3.75%
CPT PV: 541
if semi annual, I checked, answer still 541 ish.
or it could be that your CF is set at BEG of periord or END of period
Thanks
semi annual will be:
N=20
PMT= 0.0475x500,000,000/2
FV= 500,000,000
I/Y: 3.75%/2 = 1.875
CPT PV: 541.376