You are managing an investment portfolio X on behalf of your clients. Assume the assets within...

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You are managing an investment portfolio X on behalf of your clients. Assume the assets within portfolio X belong to three asset classes: stocks, fixed income and cash, with weights 55%, 22% and 23%. Suppose the benchmark index weights had been set at 45% equity, 15% bonds and 40% money market. The return of the benchmark index and the managed portfolio X for each asset class for last year were as follows: Portfolio X Benchmark Index Stocks 8.18% 6.25% Bonds 3.79% 1.56% Money Market 0.30% 0.28% a. Calculate the excess return of portfolio X. b. Let's focus on the bond asset classes among the portfolio X. You have a one-year, s100,000 bond carries a coupon rate of 10%. The bond will make the payment of accrued interest and one-half of the principal at the end of six months. The remaining principal and accrued interest are due at the end of the year. If the required yield is 20% annually, what is the duration of the bond? You are managing an investment portfolio X on behalf of your clients. Assume the assets within portfolio X belong to three asset classes: stocks, fixed income and cash, with weights 55%, 22% and 23%. Suppose the benchmark index weights had been set at 45% equity, 15% bonds and 40% money market. The return of the benchmark index and the managed portfolio X for each asset class for last year were as follows: Portfolio X Benchmark Index Stocks 8.18% 6.25% Bonds 3.79% 1.56% Money Market 0.30% 0.28% a. Calculate the excess return of portfolio X. b. Let's focus on the bond asset classes among the portfolio X. You have a one-year, s100,000 bond carries a coupon rate of 10%. The bond will make the payment of accrued interest and one-half of the principal at the end of six months. The remaining principal and accrued interest are due at the end of the year. If the required yield is 20% annually, what is the duration of the bond?

Answer rating: 100% (QA)

a Excess Return 22433 See calculation below Stocks 818 x 55 625 x 45 16865 Bonds ... View the full answer