Question: Problem Set 3 Please show your work 1. Consider the following Fixed Income Bond Fund for Marta Inc. e is for Eurodollars Notional principal of

Problem Set 3 Please show your work 1. Consider the following

Problem Set 3 Please show your work 1. Consider the following Fixed Income Bond Fund for Marta Inc. e is for Eurodollars Notional principal of portfolio (in millions) e150 Average bond coupon payment (per E100) e3.1 Coupon Frequency Annual Investment Horizon 1 Year Current Average Bond Price Expected avegage bondprice in one year (assuming an unchanged yield curve) 101.1 Average bond convexity 17 Average bond modified duration 3.5 Expected average yield and yield spread change 0.30% Expected credit losses 0.15% Expected Currency losses 0.70% Value of the portfolio's Equity (millions) e97.2 Value of borrowed funds (millions) e 51 Borrowing rate 3.20% Return on invested funds 6.50% a. Calculage the total expected return of this porftolio. (assume no reinvestment income)

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