how all your work. You are a pension fund manager with two investments in your portfolio...

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how all your work. You are a pension fund manager with two investments in your portfolio currently with a total market value of $10 mil. The current market interest rates on both investments are 8%. You have a 10-year zero coupon bond with 6 years to mature currently worth $4 mil. You also own a 4-year 11% annual coupon bond with 5 years to mature worth $6 mil currently with a duration of 4.5 years. If the market interest rates were to increase by 10 basis point tomorrow, what is your total portfolio gains/loss? 2. 1. You have 5000 shares of stock currently priced at $40 per share ready to be sold in January for tax reason. To hedge for downside risk, you want to enter into a collar to save hedging cost. January calls with a strike price of $45 are selling at $2; and January puts with a strike price of $35 are selling at $3. What will be your portfolio value in January (net of the proceeds from the options) if the stock price ends up at (a) $31? (b) $49? (Answer both a and b). how all your work. You are a pension fund manager with two investments in your portfolio currently with a total market value of $10 mil. The current market interest rates on both investments are 8%. You have a 10-year zero coupon bond with 6 years to mature currently worth $4 mil. You also own a 4-year 11% annual coupon bond with 5 years to mature worth $6 mil currently with a duration of 4.5 years. If the market interest rates were to increase by 10 basis point tomorrow, what is your total portfolio gains/loss? 2. 1. You have 5000 shares of stock currently priced at $40 per share ready to be sold in January for tax reason. To hedge for downside risk, you want to enter into a collar to save hedging cost. January calls with a strike price of $45 are selling at $2; and January puts with a strike price of $35 are selling at $3. What will be your portfolio value in January (net of the proceeds from the options) if the stock price ends up at (a) $31? (b) $49? (Answer both a and b).

Answer rating: 100% (QA)

1 We must determine the price change of each investment as a result of the rise in market interest rates in order to determine the overall portfolio gain or loss Lets start with bonds having a zero co... View the full answer