Question: Question 2 homework 3 Q2. (2 marks) The following data are given on a U.S. bond portfolio. What is the total expected return of this

Question 2 homework 3

Q2. (2 marks) The following data are given on a U.S. bond portfolio. What is the total expected return of this bond portfolio over the next 12 months? Notional principal of portfolio (in millions) Average bond coupon payment (per $100 par value) Coupon frequency Current average bond price Expected average bond price in one year (assuming an unchanged yield curve) Average bond convexity Average bond modied duration Expected average yield and yield spread change Expected credit losses $500 $3.50 Annual $98.50 $99.50 1 8 3 .25 0.20% 0.30%

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