A financial institution has an investment horizon of two years 9 33 months (or 2 777 years) The institution has converted all assets into a portfolio of 8 percent, $1,000, three year bonds that are trading at a yield to maturity of 10 percent The bonds pay interest annually The portfolio manager be...

a The bonds have a duration of 2777 years which is 3333 months For practical purposes the bond i ...

A financial institution has an investment horizon of two years 9.33 months (or 2.777 years). The institution

Question:

A financial institution has an investment horizon of two years 9.33 months (or 2.777 years). The institution has converted all assets into a of 8 percent, $1,000, three-year bonds that are trading at a yield to of 10 percent. The bonds pay interest annually. The manager believes that the assets are immunized against interest rate changes.
a. Is the immunized at the time of bond purchase? What is the duration of the bonds?
b. Will the be immunized one year later?
c. Assume that one-year, 8 percent zero-coupon bonds are available in one year. What proportion of the original should be placed in these bonds to rebalance the Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...