Question: Part 1 Current 1-yr interest rate is 12%. Forward rate during 2 nd year is 9% and is expected to rise by 0.5% each of

Part 1

Current 1-yr interest rate is 12%. Forward rate during 2^nd year is 9% and is expected to rise by 0.5% each of the next 3 years. Calculate YTM for 2-yr, 3-yr, and 4-yr bond. Draw the yield curve and explain its shape using appropriate theory of term structure.

Part 2

On January 1^st, 2019, a mutual fund raised $24,000 by issuing 1,000 shares and invested the proceeds in 80 shares of Alpha Inc. @ $80, 200 shares of Beta Inc. @ $43 and 300 shares of Gamma Inc. @ $18. On December 31^st, 2019, Alpha, Beta, and Gamma stock prices were $82, $35, and $22, respectively. There was a 5-for-2 stock split in Beta stock on September 15^th, 2019. What is the NAV per share on December 31^st, 2019?

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