A pension fund's liabilities has a PV01 of $200 million. The plan has $100 billion of assets with a weighted average modified duration of 8. The highest duration bond that the plan can invest in has a modified duration of 28. How much of the existing assets should be invested in this bond with a modified duration of 28 to minimize the interest risk exposure of the fund? A. $0 B. $20 billion C. $40 billion D. $60 Billion. Need typed answer only.Please give answer within 45 minutes
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A pension fund's liabilities has a PV01 of $200 million. The plan has $100 billion of assets with a weighted average modified duration of 8. The highest duration bond that the plan can invest in has a modified duration of 28. How much of the existing assets should be invested in this bond with a modified duration of 28 to minimize the interest risk exposure of the fund?
A. $0
B. $20 billion
C. $40 billion
D. $60 Billion.
Need typed answer only.Please give answer within 45 minutes
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- A pension fund faces a promised outflow of $5 million in 6 years. Its managers plan to dedicate a portfolio comprised of the following two bonds to meet this obligation. a. What must be the proportions ((W7, W6) or (Weight(A), Weight(B)) of the two bonds in this 2-security portfolio to immunize it against changes in interest rates? b. What is the yield to maturity for the immunized portfolio? c. How much needs to be invested in each bond to build an immunized portfolio with an expected value of $5 million in 6 years? d. Suppose that it is now 3 years later and that there has been a parallel increase in interest rates of 2%. Explain how immunization at least partially protects this portfolio. That is, what are the sources of losses and gains associated with each of the bonds caused by the increase in interest rates? How do they offset each other?3. A pension fund has the following liability obligations to its pensioners: Market Value $4.25 Bln $5.75 Bln $3.50 Bln Liability A B C It has $13.50 Bln available cash to invest in the following bonds: Bond Ꭰ E Modified Duration Modified Duration 5.25 11.86 6.25 8.05 7.55 Set up the system of equations to determine how much of its available cash should the pension fund invest in the two bonds to ensure that the market value duration of assets will match the market value duration of liabilities.A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan? 52.38% 48.38% 33.58% 25.48%
- D3) Finance You invest in a mutual fund that charges a 3% front-end load, 1% operating costs, and a 1% 12b-1 fees. What are the total fees in year 1 on an initial investment of $20,000 with 10% annual growth in fund's asset value, or NAV? Note that "initial investment" means it is before the deduction of frontend load.es Required information [The following information applies to the questions displayed below.] A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Stock fund (S) 15% 9% Bond fund (B) The correlation between the fund returns is 0.15. Expected Return Expected return Standard deviation Required: What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % % Standard Deviation 32% 23%Required information [The following information applies to the questions displayed below] A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Stock fund (S) Bond fund (8) Expected Return 16% 10% The correlation between the fund returns is 0.10. Standard Deviation 32% 23% Required: What is the Sharpe ratio of the best feasible CAL? (Do not round intermediate calculations. Round your answer to 4 decimal places.) Sharpe ratio
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- = Consider the following DB pension plan: market value of assets $300 million, projected value of liabilities = $450 million, liability duration (i.e., duration of liabilities) = 10. If the portfolio manager wants to hedge interest-rate risk, what should be the duration of her portfolio? 13 12 15 14 0000Required information [The following information applies to the questions displayed below] A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return 17% 11% Stock fund (5) Bond fund (8) The correlation between the fund returns is 0.10 Expected return Standard deviation Standard Deviation 40% 31X Required: What is the expected return and standard deviation for the minimum-variance portfolio of the two risky funds? (Do not round intermediate calculations. Round your answers to 2 decimal places.)Required information [The following information applies to the questions displayed below.] A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund, and the third is a T-bill money market fund that yields a sure rate of 5.5%. The probability distributions of the risky funds are: Expected Return 15% 9% Stock fund (S) Bond fund (B) The correlation between the fund returns is 0.15. Portfolio invested in the stock Portfolio invested in the bond Expected return Standard deviation Required: Solve numerically for the proportions of each asset and for the expected return and standard deviation of the optimal risky portfolio. (Do not round intermediate calculations and round your final answers to 2 decimal places.) Standard Deviation 36% 27% % % % %