Calculate the companys exposure to the 1 year rate

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Reference no: EM131239635

A company has a long position in a 2-year bond and a 3-year bond, as well as a short position in a 5-year bond. Each bond has a principal of $100 and pays a 5% coupon annually. Calculate the company's exposure to the 1-year, 2-year, 3-year, 4-year, and 5-year rates. Use the data in Tables 21.7 and 21.8 to calculate a 20-day 95% VaR on the assumption that rate changes are explained by

(a) one factor,

(b) two factors, and

1148_Table 1.jpg

1343_Table 2.jpg

Reference no: EM131239635

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