ou have been assigned to managed a portfolio of Indonesian bonds (consist of 20% short term; < I year and 80% long term; mostly 5-15 years). The board has asked you to update the performance in tomorrow meeting. You should prepare the answers to following questions (20%): Describe duration and convexity! What are they mainly used for? If it happens that your calculated duration and convexity are -4 and 12 respectively; how much does a 300 bps change in interest rate would affect your portfolio? If last month inflation rate has increased 150% due to unexpected rise in price of food and fuel. Describe the risk from this macroeconomic event to your portfolio!

The stock price is currently $30. Each month for the next two months it is expected to increase by 8% or reduce by 10%. The risk-free interest rate is 5%. Use a two-step tree to calculate the value of a derivative that pays off [max(30 — St； 0)]2, where St is the stock price in two months? If the derivative is American-style, should it be exercised early?

Km for the following Individual or component costs of capital) Your firm is considering a new investment proposal and would like to calculate its weighted average cost of capital. To help in this compute the cost of capital for the a. A bond that has a $1,000 par value (face value) and a contract or coupon interest rate of 11.4 percent mat is paud semiannually. The bond is currently selling for a price of $1,121 and will mature in 10 years The firm's tax rate is 34 percent b. If the firm's bonds are not frequently traded, how would you go about determining a cost of debt for this company? A new common stock issue that paid a $174 dividend last year. The par value of the stock is $15, and the firm's dividends per share have grown at a rate of 81 percent per year. This growth rate is expected to continue into the foreseeable tuture The pnce of this stock is now $27 12 d. A preferred stock paying a 10.7 percent dividend on a $126 par value The preferred shares are currently selling for…

Imagine that, during a job interview, you are handed the following quotes on U.S. Treasuries: Bond Maturity Coupon rate Yield to (years) maturity 1 1 5% 4.5% 2 2 5% 5.0% 3 3 0% 5.0% Assume that the par value is $100 and coupons are paid annually, with the first coupon payment coming in exactly one year from now. The yield to maturity is also quoted as an annual rate. What should be the 1-year forward rate between years 2 and 3? a. 6.482% ○ a. O b. 6.137% c. 6.507% O d. 6.736% NAVA