Describe the process of bond portfolio immunization, and explain why an investor would want to immunize a portfolio. Would you consider portfolio immunization a passive investment strategy comparable to, say, a buy-and-hold approach? Explain.
Answer to relevant QuestionsBriefly describe a bond ladder and note how and why an investor would use this investment strategy. What is a tax swap and why would it be used? How might you, as a bond investor, use information about the term structure of interest rates and yield curves when making investment decisions? Briefly explain what will happen to a bond’s duration measure if each of the following events occur. a. The yield to maturity on the bond falls from 8.5% to 8%. b. The bond gets 1 year closer to its maturity. c. Market ...You are evaluating an outstanding issue of $1,000 par value bonds with a 12% coupon rate that mature in 30 years and make quarterly interest payments. If the current market price for the bonds is $1,065, what is the quoted ...A bond has a Macaulay duration of 8.62 and is priced to yield 8%. If interest rates go up so that the yield goes to 8.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down ...
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