Question $1$

a$)$ Portfolio management involves balancing both risk and return. Each security

belongs to a different asset class. It is important for the portfolio manager to

determine the allocation among different asset classes.

Required;

Discuss the steps involved in portfolio investment and management process.

b$)$ A Tshs $1000$ perpetual bond is currently selling at Tshs $995.$ The coupon rate

of interest is $13\mathrm{.}5$ percent and the appropriate discount rate is $15$ percent.

Required:

Calculate the value of the bond. Should it be bought? What is its yield at

maturity?