Abacus Ltd is an investment fund that specializes in fixed income securities. At the end of...
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Abacus Ltd is an investment fund that specializes in fixed income securities. At the end of 2010 the fund's bond portfolio has the following information Bond Yield to Maturity A B C D 12% 14% (i) (ii) (iii) 8% 10% Price 1045 2265 1430 1100 Duration 2.35 4.26 3.45 4.20 Convexity 16.46 22.80 11.96 15.56 Assume that the yield to maturity on each bond increases by 4%, calculate The percentage by which the price of each bond will decrease The amount in cedis by which the price of each bond will decrease The percentage and the cedi decrease in the total value of the portfolio. (2 mark) (2 marks) (2 marks) Abacus Ltd is an investment fund that specializes in fixed income securities. At the end of 2010 the fund's bond portfolio has the following information Bond Yield to Maturity A B C D 12% 14% (i) (ii) (iii) 8% 10% Price 1045 2265 1430 1100 Duration 2.35 4.26 3.45 4.20 Convexity 16.46 22.80 11.96 15.56 Assume that the yield to maturity on each bond increases by 4%, calculate The percentage by which the price of each bond will decrease The amount in cedis by which the price of each bond will decrease The percentage and the cedi decrease in the total value of the portfolio. (2 mark) (2 marks) (2 marks)
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Answer rating: 100% (QA)
To determine the impact of a yield increase on the bond portfolio we need to consider how the yield affects the price and duration of each bond For bo... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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