Can any one explain my following query?
Upward-sloping yield curve, the immunization target rate of return will be less than the yield to maturity, because of lower reinvestment return.
my question is when we face upward sloping yield curve, which means we expect interest to goes up in the future, then the reinvestment return will be higher, isn’t it?
number 14, In Ibahn’s second response to Palme, the duration of the sample leveraged portfoilo is closest to ?
the correct anwer is( 5,125,000/100,000,000)*100=5.13.
my question is why we use “investor’s equity in the original portfolio” instead of “market value of the new portfolio 125,000,000” ( 5,125,000/125,000,000)*100=4.13? my point is since the question is asking “sample leveraged portfolio”, market value of new portfolio should be used
Thanks in advace for any kind expert.