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Objective of immunizing an obligation

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With the objective of immunizing an obligation, a financial manager decides to invest in a portfolio of 2 bonds. A zero coupon bond which matures exactly 3 years from now and a 10% coupon bond (coupons are paid annually) that matures exactly 2 years from now and that has a duration of 1.912. Assume the yield to maturity is 6% and the convexity of the coupon bond is 5.1. What does this mean and what are the implications? (Illustrate your answer with some calculations)

Reference no: EM132761943

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