Consider an asset with a current market value of $250 000 and a duration of 3.3 years.Assume the asset is partially funded through zero-coupon bonds which currently sells for $225 000 and has a maturity of 4 years.The current discount rate is 15% and interest rates are expected to increase by 150 basis points.Which of the following statements is true?
A)The current net worth of the position is $25 000 and if interest rates increase the net worth will not be affected.
B)The current net worth of the position is $25 000 and if interest rates increase the net worth will increase, too.
C)The current net worth of the position is $25 000 and if interest rates increase the net worth will decrease.
D)The current net worth of the position cannot be determined; however, if interest rates increase the net worth will increase, too.

Question

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The Answer of Consider an asset with a current market value of $250 000 and a duration of 3.3 years.Assume the asset is partially funded through zero-coupon bonds which currently sells for $225 000 and has a maturity of 4 years.The current discount rate is 15% and interest rates are expected to increase by 150 basis points.Which of the following statements is true?
A)The current net worth of the position is $25 000 and if interest rates increase the net worth will not be affected.
B)The current net worth of the position is $25 000 and if interest rates increase the net worth will increase, too.
C)The current net worth of the position is $25 000 and if interest rates increase the net worth will decrease.
D)The current net worth of the position cannot be determined; however, if interest rates increase the net worth will increase, too.

Consider an Asset with a Current Market Value of $250