- You are managing a portfolio of 2 bonds, each with a $1,000,000 par value. The...
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- You are managing a portfolio of 2 bonds, each with a $1,000,000 par value. The portfolio originally had a duration of 4.0 but due to interest rate changes, that has fallen to 2.987. The portfolio values are now as follows: 1) ii) Security Bond A Bond B PORTFOLIO Market Value 876,000 1,342,300 2,218,300 Duration 4.975 1.689 2.987 Dollar Duration $43,581 $22,671 $66,252 What % of the portfolio should be invested in bonds A & B in order to rebalance the portfolio back to its original duration (without having to add additional funds)? (2 marks) After you've rebalanced, what will be the Money Duration (aka Dollar Duration) of the portfolio? (2 marks) - You are managing a portfolio of 2 bonds, each with a $1,000,000 par value. The portfolio originally had a duration of 4.0 but due to interest rate changes, that has fallen to 2.987. The portfolio values are now as follows: 1) ii) Security Bond A Bond B PORTFOLIO Market Value 876,000 1,342,300 2,218,300 Duration 4.975 1.689 2.987 Dollar Duration $43,581 $22,671 $66,252 What % of the portfolio should be invested in bonds A & B in order to rebalance the portfolio back to its original duration (without having to add additional funds)? (2 marks) After you've rebalanced, what will be the Money Duration (aka Dollar Duration) of the portfolio? (2 marks)
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To rebalance the portfolio back to its original duration without adding additional funds we need to ... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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