You are facing an obligation with a present value of $100000, duration 8 years, and convexity 24. You want to utilize an immunization strategy for this obligation, which exclusively involves three bonds: A,B and C. You calculated the following information for the three bonds:
|
Bond
|
Duration
|
Convexity
|
|
A
|
4
|
16
|
|
B
|
12
|
20
|
|
C
|
16
|
32
|
- How much money should you invest in each of the bonds with a duration matching immunization strategy?
- How much money should you invest in each three bonds with duration and convexity matched immunization strategy?