The effective duration of the pool was reported by the state auditor as 7 4 years in December 1994 This high duration is the result of two factors The average duration of individual securities of 2 74 years The leverage of the portfolio, which was 2 7 at the time In 1994, interest rates went up by ...

ANSWER D The loss predicted by the duration approximation stands at 16 billion The loss w ...

The effective duration of the pool was reported by the state auditor as 7.4 years in December

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The effective duration of the pool was reported by the state auditor as 7.4 years in December 1994.

This high duration is the result of two factors:
The average duration of individual securities of 2.74 years
The leverage of the portfolio, which was 2.7 at the time.
In 1994, interest rates went up by about 3%.
The loss predicted by the duration approximation stands at $1.6 billion.

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Governmental and Nonprofit Accounting

ISBN: 978-0132751261

10th edition

Authors: Robert Freeman, Craig Shoulders, Gregory Allison, Robert Smi

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Posted Date: Sep 22, 2020 10:45 PM

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The effective duration of the pool was reported by the state auditor as 7.4 years in December

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ANSWER D The loss predicted by the duration approximation stands at 16 billion The loss w... View the full answer

Governmental and Nonprofit Accounting

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