What are Treasury STRIPS? State one advantage of using STRIPS to construct a Liabilities Matching Bond...

 

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What are Treasury STRIPS? State one advantage of using STRIPS to construct a Liabilities Matching Bond Portfolio. State one difficulty for a STRIPS provider. [3] The Codgers Pension Fund has annual liabilities for the next 3 years shown in the Liability column. The interest rate is flat at 2.5% for the three years. Complete the Price and STRIPS Price columns. [5] Using the following annual coupon bonds with a par value of 100, construct the Liabilities Matching, dedicated portfolio. [4] Annual Coupon (%) 4 3 2 Maturity Liability Price(p) () (years) 3 2 1 520 000 792 500 807500 STRIPS Price (p) What is a cost of the Liabilities Matching portfolio? [2] By stripping the coupons of the coupon bearing bonds in your answer to (ii) above, state the number and maturities of the Zero Coupon bonds that can be produced. [4] With an equity portfolio, Security Selection can produce portfolios in which side-bets with the market are taken. Explain starting with a market portfolio how a portfolio of side-bets can result. The Elton and Gruber and Treynor- Black portfolios are portfolios with side-bets. In what ways are they similar and in what ways are they different? [7] What are Treasury STRIPS? State one advantage of using STRIPS to construct a Liabilities Matching Bond Portfolio. State one difficulty for a STRIPS provider. [3] The Codgers Pension Fund has annual liabilities for the next 3 years shown in the Liability column. The interest rate is flat at 2.5% for the three years. Complete the Price and STRIPS Price columns. [5] Using the following annual coupon bonds with a par value of 100, construct the Liabilities Matching, dedicated portfolio. [4] Annual Coupon (%) 4 3 2 Maturity Liability Price(p) () (years) 3 2 1 520 000 792 500 807500 STRIPS Price (p) What is a cost of the Liabilities Matching portfolio? [2] By stripping the coupons of the coupon bearing bonds in your answer to (ii) above, state the number and maturities of the Zero Coupon bonds that can be produced. [4] With an equity portfolio, Security Selection can produce portfolios in which side-bets with the market are taken. Explain starting with a market portfolio how a portfolio of side-bets can result. The Elton and Gruber and Treynor- Black portfolios are portfolios with side-bets. In what ways are they similar and in what ways are they different? [7]

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Sure lets tackle the question step by step 1 What are Treasury STRIPS Treasury STRIPS are a type of US government debt security that stands for Separate Trading of Registered Interest and Principal of ... View the full answer