Don’t look at your formula sheet: Portfolio value: $100mm Borrowed funds: $55mm Duration of invested funds: 4 Duration of borrowed funds: 1 What’s the duration of the portfolio? GO
100(4) - 55(1) / (100 - 55) = 7 and 2/3rds
right, but you and bolivia are still landlocked. you’re going to ace this test if you didn’t know that already.
man, it depends on the context and the question. If the portfolio value includes the borrowed fund, the duration of the portfolio is 4. I guess ur question is asking for the duration of the EQUITY. --On the exam, I’ll use Paraguay’s method…
7.67…agreed that’s it’s really the duration of the net value of the portfolio
2.35 Da*A = Dl*L+ De*E Da*100 = (1*55)+(4*45) Da= 235/100 = 2.35
Could be argued that since you’re borrowing that portion isn’t really part of your portfolio, but whatever. They ask, I answer.
the equity in the portfolio is 45 the liab is the borrowed amount of 55 for the total asset/portfolio os 100 what am i missing here?
100(4)-55(1)/45 = 7.67
leveraged duration is D(A)-D(L)/Equity
i may be wrong here ( our formulas are the same) DaA= DlL+DeE is De=D(A)-D(L)/Equity but i am applying it different …i will look over later tonight
yep, that is the right formula. I just am reviewing notecards and figured i’d toss that up. there are so many little formulas that i don’t remember. it’s almost just comical at this point.
hey guys i need some help here the formula is straightforward we all agree the equity is what u have invested ( the unborrowed total amount) so 45 the liab is the amount borrowed 55 and the asset is the amount that u will invest 100 or am i interpreting this incorrectlty
yes you are absolutely correct i think you applied the formula wrong. Da*100 = (1*55)+(4*45) Da= 235/100 = 2.35 Da=4, you put De= 4 you are solving for De, not Da
skipps with euphemism yes you are absolutely correct i think you applied the formula wrong but why is the equity called the portfolio, its not your portfolio, your portfolio consist of both the equity and the borrowed sum
equity is not called portfolio…assets is the portfolio. they say the portfolio is 100M and liabs is 55M assets=100M Liabs= 55M solve for equity amount and then apply the formula
pimpineasy Wrote: ------------------------------------------------------- > hey guys i need some help here > > the formula is straightforward we all agree > > the equity is what u have invested ( the > unborrowed total amount) so 45 > the liab is the amount borrowed 55 > and the asset is the amount that u will invest > 100 > > > or am i interpreting this incorrectlty hope this helps P = 100 ( 45 is equity E, and 55 is borrowed B, Portfolio = our total Assets) E = 45 B = 55 Dp (= Duration of our portfolio,assets) = 4 Db = 1 De = ? P*Dp = E*De + B*Db 100 * 4 = 45 * De + 55 * 1 Solve for De.