An investment company has a time horizon of 3.7 years It's portfolio is invested in 5% 4-year
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Question:
An investment company has a time horizon of 3.7 years |
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It's portfolio is invested in 5% 4-year annual payment coupon bonds |
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The portfolio has a par value of $2M and current yields are 5.5% |
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a.Is the portfolio immunized when the bonds were purchased?
Full credit requires calculations to support your answer
b. Would the portfolio be immunized in year 2?
c. If the firm wanted rebalance the portfolio in year 2 using a 1-year 6% zero coupon bond, what proportion of the original portfolio should it be?
Related Book For
Investment Analysis and Portfolio Management
ISBN: 978-0538482387
10th Edition
Authors: Frank K. Reilly, Keith C. Brown
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