Homework Answers
Duration of Bond Portfolio = 0.50(4) + 0.25(6) + 0.25(10)
Duration of Bond Portfolio = 6.0 years
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Packer has a fixed income portfolio that consists of Bond A, Bond B, and Bond C....
QUESTION 29 Peter has a fixed income portfolio that consists of Bond A, Bond B, and...
QUESTION 29 Peter has a fixed income portfolio that consists of Bond A, Bond B, and Bond C. The bonds have durations of 4,6 and 10, respectively. If Peter has 50% invested in Bond A and 25% invested in each of the other two bonds, what is the duration for the portfolio? Assume that the correlation between the bonds is 0.5. a. 5.5. b.6.0. O c. 6.7. O d. 7.2. QUESTION 30 Gordon bought a 10-year bond, with a 6%...
A suppose you have a three-security portfolio containing bonds A, B and C. The modified duration...
A suppose you have a three-security portfolio containing bonds A, B and C. The modified duration of the portfolio is 6.5. The market values of bonds A, B and Care $30, $15 and $40, respectively. The modified durations of bonds A and Bare 3.5 and 5.5, respectively. Which of the following amounts is closer to the modified duration of bond C7 A) 9.1. B) 4.6. C) 7.2. D) 7.5. 7. Given the 1-year annualized spot rate of 8.3 percent, and...
Suppose you are holding a portfolio of bonds that consists of the following four bonds. Portfolio...
Suppose you are holding a portfolio of bonds that consists of the following four bonds. Portfolio Weight (%) 30 A B. Bond A $1,000 twenty-year 15% coupon bond with the interest rate of 12% A $1,000 eight-year discount bond with the interest rate of 7% $1,000 ten-year 12% coupon bond with the interest rate of 9% A $1,000 five-year 4% coupon bond with the interest rate of 5% C A D. (Note) Round your answers to 2 decimal places. 1....
Assume you have a $500,000,000 portfolio: 50% equity with a beta of 1.2, and 50% fixed...
Assume you have a $500,000,000 portfolio: 50% equity with a beta of 1.2, and 50% fixed income, corporate bonds, average credit quality of BBB, duration of 5. You wish to design a portfolio: 75% equity asset allocation, beta 1.6, fixed income 25% asset allocation, duration 3. The available futures are: equity index 2,000, multiplier 250, fixed income T-bond $100,000 par, 97 price, 2 duration. The simulation is that in one day the market appreciates by 1.5% and the interest rates...
b. A bond portfolio consists of the following three annual coupon payment bonds. Prices are per...
b. A bond portfolio consists of the following three annual coupon payment bonds. Prices are per 100 of par value. Price Coupon (%) Bond Maturity Market (years) Value 171,000 B 10 161,800 C 15 150.000 Modified Duration (years) 5.23 3.00 Yield-to- Maturity (%) 5.95 5.99 6.00 85.50 80.90 100.00 3.40 6.00 7.98 9.71 i. Determine the weight of each bond in the bond portfolio. (3 marks) ii. Calculate the bond portfolio's modified duration. (2 marks)
Assume you have a $500,000,000 portfolio: 50% equity with a beta of 1.2, and 50% fixed...
Assume you have a $500,000,000 portfolio: 50% equity with a beta of 1.2, and 50% fixed income, corporate bonds, average credit quality of BBB, duration of 5. You wish to design a portfolio: 75% equity asset allocation, beta 1.6, fixed income 25% asset allocation, duration 3. The available futures are: equity index 2,000, multiplier 250, fixed income Tbond $100,000 par, 97 price, 2 duration. The simulation is that in one day the market appreciates by 1.5% and the interest rates...
e. Assume a third stock, Stock C, is available for inclusion in the portfolio. Stock C...
e. Assume a third stock, Stock C, is available for inclusion in the portfolio. Stock C produced the following returns during the past five years: Year Stock C's Return, o 32.00% -11.75 10.75 32.25 -6.75 Input these values and calculate the average return, standard deviation, and coefficient of variation for Stock C. f. Assume that the portfolio now consists of 33.33 percent Stock A, 33.33 percent Stock B, and 33.34 percent Stock C. How does this composition affect the portfolio...
MLK Bank has an asset portfolio that consists of $160 million of 15-year, 8.5 percent coupon,...
MLK Bank has an asset portfolio that consists of $160 million of 15-year, 8.5 percent coupon, $1,000 bonds with annual coupon payments that sell at par. a-1. What will be the bonds’ new prices if market yields change immediately by ± 0.10 percent? At +0.10 At -0.10 a-2. What will be the new prices if market yields change immediately by ± 2.00 percent? At +2.0 at -2.0 b-1. The duration of these bonds is 9.0101 years. What are the predicted...
In a market crash the following are usually true? Fixed-income portfolios hedged with short Treasury bond...
In a market crash the following are usually true? Fixed-income portfolios hedged with short Treasury bond and futures lose less than those hedged with interest rate swaps given equivalent durations Bid-offer spreads widen because of lower liquidity The spread between off-the-run bonds and benchmark issues widen Choose: a., b. and c. b. and c. a. and c. none of the above
MLK Bank has an asset portfolio that consists of $160 million of 15-year, 8.5 percent coupon,...
MLK Bank has an asset portfolio that consists of $160 million of 15-year, 8.5 percent coupon, $1,000 bonds with annual coupon payments that sell at par. a-1. What will be the bonds' new prices if market yields change immediately by 0.10 percent? a-2. What will be the new prices if market yields change immediately byt2.00 percent? b-1. The duration of these bonds is 9.0101 years. What are the predicted bond prices in each of the four cases using the duration...
QUESTION 29 Peter has a fixed income portfolio that consists of Bond A, Bond B, and Bond C. The bonds have durations of 4,6 and 10, respectively. If Peter has 50% invested in Bond A and 25% invested in each of the other two bonds, what is the duration for the portfolio? Assume that the correlation between the bonds is 0.5. a. 5.5. b.6.0. O c. 6.7. O d. 7.2. QUESTION 30 Gordon bought a 10-year bond, with a 6%...
A suppose you have a three-security portfolio containing bonds A, B and C. The modified duration of the portfolio is 6.5. The market values of bonds A, B and Care $30, $15 and $40, respectively. The modified durations of bonds A and Bare 3.5 and 5.5, respectively. Which of the following amounts is closer to the modified duration of bond C7 A) 9.1. B) 4.6. C) 7.2. D) 7.5. 7. Given the 1-year annualized spot rate of 8.3 percent, and...
Suppose you are holding a portfolio of bonds that consists of the following four bonds. Portfolio Weight (%) 30 A B. Bond A $1,000 twenty-year 15% coupon bond with the interest rate of 12% A $1,000 eight-year discount bond with the interest rate of 7% $1,000 ten-year 12% coupon bond with the interest rate of 9% A $1,000 five-year 4% coupon bond with the interest rate of 5% C A D. (Note) Round your answers to 2 decimal places. 1....
b. A bond portfolio consists of the following three annual coupon payment bonds. Prices are per 100 of par value. Price Coupon (%) Bond Maturity Market (years) Value 171,000 B 10 161,800 C 15 150.000 Modified Duration (years) 5.23 3.00 Yield-to- Maturity (%) 5.95 5.99 6.00 85.50 80.90 100.00 3.40 6.00 7.98 9.71 i. Determine the weight of each bond in the bond portfolio. (3 marks) ii. Calculate the bond portfolio's modified duration. (2 marks)
e. Assume a third stock, Stock C, is available for inclusion in the portfolio. Stock C produced the following returns during the past five years: Year Stock C's Return, o 32.00% -11.75 10.75 32.25 -6.75 Input these values and calculate the average return, standard deviation, and coefficient of variation for Stock C. f. Assume that the portfolio now consists of 33.33 percent Stock A, 33.33 percent Stock B, and 33.34 percent Stock C. How does this composition affect the portfolio...
MLK Bank has an asset portfolio that consists of $160 million of 15-year, 8.5 percent coupon, $1,000 bonds with annual coupon payments that sell at par. a-1. What will be the bonds' new prices if market yields change immediately by 0.10 percent? a-2. What will be the new prices if market yields change immediately byt2.00 percent? b-1. The duration of these bonds is 9.0101 years. What are the predicted bond prices in each of the four cases using the duration...
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