Fins 2624 - Portfolio Management Notes Essay

a. The Yield to Maturity (YTM) is the nominal rate of return which investors would realize if they held the bond to maturity and the bond did not default.

The yield to maturity on a 15-year bond is a true estimate of the cost of 30-year bond

∆P/P = –D*(∆y) D* = D/(1 + y) = 7/1.073 = 6.52 ∆P/P = –D*(∆y) = –6.52(–0.09%) = .59% New price = $1,073(1.0059) = $1,079.33 Learning Objective: 11-02 Compute the duration of bonds; and use duration to measure interest rate sensitivity.

What are HR policies: Human resource policies (HR) are rules and guidelines that all workers must follow. Human resource policies are typically set in place by the corporate office of the company. These policies deal with recruitment, hiring, transferring, workplace expectations, benefits, payroll, and workplace health and safety. These HR policies affect the overall morale of ones companies. Keeping workers content keeps the company in a good stand point. Happy workers are going to perform their best which will give the company positive

Victoria should report the purchase price of the additional similar bonds as investment in long- term bonds-a noncurrent asset-and the two months' accrued interest as interest receivable-a current asset. The amount paid by Victoria for the two months' interest accrued between the last interest payment and the date of the purchase should not be included in the investment in long-

Jackson Corporation’s bonds have N=12 years remaining to maturity. Interest is paid annually, the bonds have a FV=$1,000 par value, and the coupon interest rate is PMT=8%. The bonds have a yield to maturity of I=9%. What is the current market price of these bonds? $928.39

Suppose that a 30-year U.S. Treasury bond offers a 4% coupon rate, paid semiannually. The market price of the bond is $1,000, equal to its par value.

In a more specific term, by breaking down the P&L of the portfolio, the realized profits of the short term, mid-term and long-term bonds are $327,000, $149,000 and $496,000, respectively. All the three bonds have similar trends in price line except that at the end of second period, the short-term bond fluctuates in the range of $100.6 to $101.8 while the other two bonds experience huge price rocket. For the short-term

To determine the price of the bond, the face value of the bond must be brought to its present value. The rationale behind this comes from an investment principle that considers that the money given up in the present could yield a gain in the long term if used as an investment. To arrive to the present value, we use a market rate that represents the yield the average investor would require to spend money in a new venture (in this particular case, 11%). Therefore, even though the Bond’s face value might be $1,000,000, your company is expected to get $924,623.74. The difference between this two numbers, $75,376.26, is considered a discount that you allow for offering a rate that is lower than the rate requested by the investors (in this case, 9%).

Why? Because the YTM is defined as the rate which, if used to discount the bond’s cash

Moreover, assuming that the bond interest rate $r$ is constant, the above-mentioned equation can be simplified to:

300 Year 4 300 Year 5 300 Year 6 300 YTM calculation assumes that coupon payments will be reinvested over time at the same level Future Value Analysis Time Cash-Flows All cash-flows referenced to Year 6.

Bond Discount represents an additional cost of borrowing and should be recorded as bond interest expense over the life of the bond. To follow the matching principle, bond discount is allocated to expense in each period in which the bonds are outstanding. This is referred to as amortizing the discount. Amortization of the discount increases the amount of interest expense reported each period. As the discount is amortized, its balance will decline and as a consequence, the carrying value of the bonds will increase, until at maturity the carrying value of the bonds equals their face amount. The journal entries are as follow:

The Human resource department, HR, has shown a big change in responsibilities and roles with the devolution of HR taking place all over the world. The job of HR has moved from being more tactical to being more strategic in nature. A major chunk of functions that were handled by HR manager before have now been given to the line managers and therefore allow the HR department to focus more on planning strategies which will help lead the organization to a better position.

Term structure interest rate is a rate which relates the interest rate or rate of return to the time to maturity.