Question 32 about targeting duration using futures… shouldint the Di be 11 and the portfolio value be 100 million? The answer uses just the portfolio assets, not the levered total portfolio.
Hey janakisrii - I think we know the math behind the answer. The question asked for the duration of the portfolio which would include leverage. If it said assets there wouldn’t be confusion.
Yeah, thats my point. They say they “want a duration of 4”. The way the question is worded they’d end up with a duration of 7. Its not like levering up equity because the leverage itself had duration.
I think it’s just a poorly worded question.
Don’t think it’s a poorly worded question. The point of the question was to bring the duration of assets down. ANd furthermore, as a sanity check you should have known something was wrong because the question would never require you to use an answer from a previous question.
I think the question is differentiating between duration of levered portfolio and duration of portfolio.
Duration of levered portfolio is duration of equity. See Q13 & 14 - EOC Reading 25.
Duration of portfolio is duration of Assets, which includes both Equity and Debt.
At least that is my story and I am sticking to it. :-)
P
发表于 2013-4-24 16:05
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