cityboy

Oh ok.

So hypothetically:


100M for 5 years at a acceptable rate of 5% (semiannual) = 128M terminal value

Immunization rate = 6% (semiannual) = 128 / (1.03)^10 = 95.24M

Currently own a bond at 100M, 10 year semi annual, with 6% coupon. = 100M (since immunization rate = coupon it is trading at par)

If rates increased by 2% to 8% immediately

Current PV Bond:

n = 20
IR = 4%
PMT = 3M
FV = 100M
PV = calculated = -86409673.66

Revised Immunization trigger point (whats the name of this number again?)

128M / (1.04)^10 = 86.47M


Since 86.40 < 86.47 , immunization is triggered


Anything wrong here?