A fixed-income portfolio manager sets a minimum acceptable rate of return on the bond portfolio at 4.4% per year over the next 5 years. The portfolio is currently worth $10 million. One year later interest rates are at 5.4%. What is the portfolio value trigger point at this time that would require the manager to immunize the portfolio? Multiple Choice $12.402.307 $10,049,398 $9.534,533 $10,440,000

A fixed-income portfolio manager sets a minimum acceptable rate of return on the bond portfolio at 4.4% per year over the next 5 years. The portfolio is currently worth $10 million. One year later interest rates are at 5.4%. What is the portfolio value trigger point at this time that would require the manager to immunize the portfolio? Multiple Choice $12.402.307 $10,049,398 $9.534,533 $10,440,000

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Consider the following bond portfolio: Coupon Bond Value Maturity Yield A $300 million 3 years 0% 10% В 300 4 6. 10 400 8 10 a) What is the bond portfolio's duration? b) Calculate the capital loss on this portfolio if the yield increases from 10 to 12 percent. c) Suppose the portfolio is to be immunized over an investment horizon of approximately 5.19 years. Determine the market value of the immunized portfolio at the end of 5.19 years. 4.
4
Problem 3 A discount bond offering an annual coupon rate of 9%, with interest paid annually, has a face value of $1,000. The difference between its yield to maturity and the coupon rate is 4%. The bond matures in 8 years. What is the price of the bond? Problem 4 Consider the following information for the Global Investment Fund, which holds 4 stocks. The market's required rate of return is 13.25%, the risk-free rate is 7%, and the Fund's assets are as follows. What is the Fund's required rate of return? Stock A: Investment = $200,000, b = 1.5, Stock B: Investment = $300,000, b ==-0.5 Stock C: Investment = $500,000, b = 1.25, Stock D: Investment = $1,000,000, b = 0.75
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You manage a pension fund that will provide retired workers with lifetime annuities. You expect a large number of workers to retire in 8 years. You have the following two bonds to invest in and immunize this portfolio. Inputs Bond A Bond B Settlement date 01-01-2020 01-01-2020 Maturity date 01-01-2025 01-01-2040 Coupon rate 0.025 0.0000 Face Value $1,000.00 $1,000.00 Coupons per year 1 1 Obligation Time to Payout 8 Payout $50,000,000 Initial Yield to Maturity 0.0750 Required: Using any necessary data above, calculate the Present value and Macaulay Duration of the obligation. Assume annual payments. Then calculate the Macaulay Duration and the Modified Duration for each bond. Use this information to immunize the portfolio. Then, re-immunize the portfolio 1 year later using the new yield.
1. You are selected as an analysis to manage a fixed income portfolio for a client in particular a corporate bond. You are considering a 3-year floating rate note with 1 year benchmark rate of 2.88%. It is priced at 685 of 1000 par value. Your analysis tells you probability of default is approximately 40%. If the issue survives over the next three years due to the industry it is in. The probability of default for each year is 9% and a volatility of 12%. What is the price of the bond?
Give typing answer with explanation and conclusion
.Question A This is a question about portfolio Full explain this question and text typing work only We should answer our question within 2 hours takes more time then we will reduce Rating Dont ignore this line .
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What is the price of a five year zero-coupon, default free security with a face value of $1000.
Only typed answer The modified duration of a bond portfolio worth $3,500,000 is 8.00 years. By approximately how much does the value of the portfolio change if all yields change by 3 basis points? (hint: use the correct sign and two decimal digits accuracy. Example: -9,680.00 ) Your Answer:
Can you please walk me through this? Problem 6-11 DEFAULT RISK PREMIUM A company’s 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5 2% per year, and the real risk-free rate (r*) is 2.3%. The average inflation premium is 2 5%; and the maturity risk premium is estimated to be 0.1 x (t 1) %, where t = number of years to maturity. If the liquidity premium is 1%, what is the default risk premium on the corporate bonds?

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