(a) You are the manager for the investment portfolio of a US based manufacturing firm. Your...

 

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(a) You are the manager for the investment portfolio of a US based manufacturing firm. Your boss has recently expressed an interest in diversifying the portfolio through investing in bonds. He has asked you to give a presentation on investing in corporate bonds. You have collected the following AAA-rated bonds information from your favourite financial website. All bonds have a par value of $1,000. Explain which of the following bonds you will choose if you expect the market interest rates will decrease by 100 basis points. No calculation is required. (4 marks) Bond X Price (S) Coupon Rate (%) Maturity (years) 1,018.86 5 2 Y 1,000.00 6 2 Z 973.27 5 3 (a) You are the manager for the investment portfolio of a US based manufacturing firm. Your boss has recently expressed an interest in diversifying the portfolio through investing in bonds. He has asked you to give a presentation on investing in corporate bonds. You have collected the following AAA-rated bonds information from your favourite financial website. All bonds have a par value of $1,000. Explain which of the following bonds you will choose if you expect the market interest rates will decrease by 100 basis points. No calculation is required. (4 marks) Bond X Price (S) Coupon Rate (%) Maturity (years) 1,018.86 5 2 Y 1,000.00 6 2 Z 973.27 5 3

Answer rating: 100% (QA)

Since you expect the market interest rates to decrease by 100 basis points 1 you should choose the b... View the full answer