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Duration of the levered portfolio

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Reference no: EM132722303

Suppose that the initial value of an unlevered portfolio of Treasury securities is $200 million and the duration is 7. Suppose further that the manager can borrow $800 million and invest it in the identical Treasury securities so that the levered portfolio has a value of $1 billion. What is the duration of the levered portfolio? What is the duration of the unlevered portfolio (i.e., the duration of the equity)?

Reference no: EM132722303

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