Level3-volume 4, two question of FI

CFA Level III
#1

Dear all

Can any one explain my following query?

1.Page 29

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?

2.Page 151

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.

Jessie

#2

part 1 has been asked and answered. please use the search function for that.

part 2 - leverage is against the investor’s equity in the portfolio (please look at other examples in the book).