Interest rate environment within that confidence interval

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Reference no: EM131016030

A portfolio contains equal investments in 6 different loans with durations of 1, 2, 2, 2, 4, and 5 years. You have estimated that it is 95% certain that interest rates won't change by more than 2% over the next year. Compute the maximum possible loss on the loan portfolio resulting from the worst possible interest rate environment within that confidence interval, explaining and showing your work.

Reference no: EM131016030

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