Question: Question 8 (9 marks) BB bank has six-year zero coupon bonds with a total face value of $20 million. Given that the current market yield

Question 8 (9 marks) BB bank has six-year zero coupon bonds

Question 8 (9 marks) BB bank has six-year zero coupon bonds with a total face value of $20 million. Given that the current market yield on the bonds is 10 percent and the maximum potential adverse move in yields is estimated at 20 basis points. Compute the daily earnings at risk (DEAR) of this bond portfolio. Your supervisor does not have a finance background. Explain the meaning of your calculated DEAR to him in layman's term. Question 8 (9 marks) BB bank has six-year zero coupon bonds with a total face value of $20 million. Given that the current market yield on the bonds is 10 percent and the maximum potential adverse move in yields is estimated at 20 basis points. Compute the daily earnings at risk (DEAR) of this bond portfolio. Your supervisor does not have a finance background. Explain the meaning of your calculated DEAR to him in layman's term

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