11. Chaoprava Av is an investment advisor for high-net-worth individuals. One of her clients, Schuylkill Cy,...

Transcribed Image Text:

11. Chaoprava Av is an investment advisor for high-net-worth individuals. One of her clients, Schuylkill Cy, plans to contribute four level annual payments of $76,500 starting in 10 years. Av estimates the present value of the four future cash flows as $230,372, with a money duration of $2,609,700 and convexity of 135.142. She considers three possible portfolios to immunize the future payments, as presented in Exhibit 2 below. Exhibit 2 Data for Bond Portfolios to Immunize Four Annual Contributions Portfolio 1 Portfolio 2 Portfolio 3 Market value $245,178 $248,230 $251,337 Cash flow yield Money duration Convexity 2.521% 2,609,981 147.640 2.520% 2,609,442 2.516% 2,609,707 139.851 132.865 < Determine the most appropriate immunization portfolio in Exhibit 2. Justify your decision. 11. Chaoprava Av is an investment advisor for high-net-worth individuals. One of her clients, Schuylkill Cy, plans to contribute four level annual payments of $76,500 starting in 10 years. Av estimates the present value of the four future cash flows as $230,372, with a money duration of $2,609,700 and convexity of 135.142. She considers three possible portfolios to immunize the future payments, as presented in Exhibit 2 below. Exhibit 2 Data for Bond Portfolios to Immunize Four Annual Contributions Portfolio 1 Portfolio 2 Portfolio 3 Market value $245,178 $248,230 $251,337 Cash flow yield Money duration Convexity 2.521% 2,609,981 147.640 2.520% 2,609,442 2.516% 2,609,707 139.851 132.865 < Determine the most appropriate immunization portfolio in Exhibit 2. Justify your decision.

Answer rating: 100% (QA)

The most appropriate immunization portfolio in Exhibit 2 is Portfolio 3 This decision is justifi... View the full answer