Question

As a fixed income portiolio manager, you are conside issues from diversified chemical companies, DowDuPont and BASF Corporation, for Bank of Amenica Mermill Lynch. You are a conservative, risk averse investmenit portfolio manager. DowDuPont offers a 4%, 15-Year corporate bond with a g% YTM, priced at $596 g7. The bond convexity for DOWDuPontis 122.47. Te BASF orers a 9%. 20Year purchasing one of two bond porate bond, with a 10% YTM, priced at $91486. The bond convexity for BASF is 119.97. Bank of America Merrilt Lynch Market Strategists and Economists are projecting interest rates may possibly increase by 100 basis points, consistent with Janet Yellen's FRB forecast Bloomberg recently reported that financial markets are showing considerable weakness based on job reports and low consumer spending and that rates may possibly fall by 300 basis points. You must perform the interest rate sensitivity analysis of these two bond issues for the Head of Fixed Income closely evaluating the duration and convexity, and determining which bond is the most appropriate investment for Bank of America Merrill Lynch's fixed income portfolio, whether interest rates decline 300 basis points or increase by 100 basis points One bond must be effective under both interest rate scenaños, Substantiate your argument Note: You must prepare a Bond Duration Worksheet (refer to Financial Markets, Practice Exercises and Problems Worksheets A-C) for each bond and present the percentage changes and additional information in a format similar to Page 653 Chapter 18 The Analysis and valuation of Bonds Also, round all percentage changes to two decima places
that is all the information i was given. could you please answer it as best as possible? otherwise maybe someone else can answer it? thanks

Answer 1

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