Based upon your current portfolio, would you prefer for interest rates to increase or decrease? Why? You run a finance company with $50 million in assets. Your assets include $10 million in cash (with a duration of 0), $15 million in short-term investments with a duration of 3, and $25 million in long-term investments with a duration of 12. You are financed by $30 million in debt with a duration of 14, and $20 million in equity.
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Based upon your current portfolio, would you prefer for interest rates to increase or decrease? Why?
You run a finance company with $50 million in assets. Your assets include $10 million in cash (with a duration of 0), $15 million in short-term investments with a duration of 3, and $25 million in long-term investments with a duration of 12. You are financed by $30 million in debt with a duration of 14, and $20 million in equity.
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- Julie is the portfolio manager at know better plc. She wants to estimate the interest rate risk of assets of the company consisting of 1 million shares of Bond A, 2 million shares of Bond B, and 2 million shares of Bond C. The duration of Bond A is 5.59, a valuation model found that if interest rates decline by 30 basis points, the value of Bond A will increase to 83.5 pounds, and if interest rates increase by 30 basis points, the value of Bond to A will decline to 80.75 pounds. The same valuation model also found that if interest rates decreases by 50 basis points, the value of Bond B increases to 104.6 pounds, and if interest rates increases by 50 basis points, the value of Bond B decreases to 96.4 pounds, and the current value of Bond B is 100 pounds. Kirstin also knows from the valuation model that, by using the duration and convexity rule, if interest rates decline by 1%, the price of bond C increases approximately by 8.46 pounds, and if interest rates increase by 3%, the price of…Kirstin Brown is a portfolio manager at Standard life plc. She wants to estimate the interest rate risk of assets of the company consisting of 1 million shares of Bond A, 2 million shares of Bond B, and 2 million shares of Bond C. The duration of Bond A is 5.59, a valuation model found that if interest rates decline by 30 basis points, the value of Bond A will increase to 83.5 pounds, and if interest rates increase by 30 basis points, the value of Bond to A will decline to 80.75 pounds. The same valuation model also found that if interest rates decreases by 50 basis points, the value of Bond B increases to 104.6 pounds, and if interest rates increases by 50 basis points, the value of Bond B decreases to 96.4 pounds, and the current value of Bond B is 100 pounds. Kirstin also knows from the valuation model that, by using the duration and convexity rule, if interest rates decline by 1%, the price of bond C increases approximately by 8.46 pounds, and if interest rates increase by 3%, the…Kirstin Brown is a portfolio manager at Standard life plc. She wants to estimate the interest rate riskof assets of the company consisting of 1 million shares of Bond A, 2 million shares of Bond B, and 2million shares of Bond C. The duration of Bond A is 5.59, a valuation model found that if interest ratesdecline by 30 basis points, the value of Bond A will increase to 83.5 pounds, and if interest ratesincrease by 30 basis points, the value of Bond to A will decline to 80.75 pounds. The same valuationmodel also found that if interest rates decreases by 50 basis points, the value of Bond B increases to104.6 pounds, and if interest rates increases by 50 basis points, the value of Bond B decreases to 96.4pounds, and the current value of Bond B is 100 pounds. Kirstin also knows from the valuation modelthat, by using the duration and convexity rule, if interest rates decline by 1%, the price of bond Cincreases approximately by 8.46 pounds, and if interest rates increase by 3%, the price of…
- Suppose you have $375,000 in cash, and you decide to borrow another $63,750 at a 7% interest rate to invest in the stock market. You invest the entire $438,750 in a portfolio J with a 20% expected return and a 28% volatility. a. What is the expected return and volatility (standard deviation) of your investment? b. What is your realized return if J goes up 39% over the year? c. What return do you realize if J falls by 19% over the year?A fund manager has a well-diversified portfolio that mirrors the performance of the S&P 500and is worth $240 million. The value of the S&P 500 is 4,800, and the portfolio manager wouldlike to obtain insurance against a reduction of more than 3% in the value of the portfolio over thenext four months. The risk-free interest rate is 6% per annum. The dividend yield on both theportfolio and the S&P 500 is 4%, and the volatility of the index is 35% per annum. What amount(in dollars) of the portfolio should be sold and kept in risk-free securities for portfolio insurance?Suppose you have $100,000 in cash, and you decide to borrow another $25,000 at a 6% interest rate to invest in the stock market. You invest the entire $125,000 in a portfolio J with a 24% expected return and a 26% volatility. What is the expected return and volatility (standard deviation) of your investment? What is your realized return if J goes up 13% over the year? What return do you realize if J falls by 26% over the year?
- Suppose you have $10,000 in cash and you decide to borrow another $10,000 at a(n) 6% interest rate to invest in the stock market. You invest the entire $20,000 in an exchange-traded fund (ETF) with a 11% expected return and a 20% volatility. What is your expected return on your investment?I am having trouble figuring out this question. Can you help me? Kunal Nayyar from California, had $50,000 in investments at the beginning of the year that consisted of a diversified portfolio of stocks (40%), bonds (40%), and cash equivalents (20%). His returns over the last year were 13% on stocks, 6% on bonds, and 1% on cash equivalents.a.) What is Kunal's average return for the year?b.) If Kunal wanted to rebalance his portfolio to its original position, what specific action should he take?You are a provider of portfolio insurance and are establishing a 4-year program. The portfolio you manage is worth $110 million, and you hope to provide a minimum return of 0%. The equity portfolio has a standard deviation of 23% per year, and T-bills pay 5% per year. Assume that the portfolio pays no dividends.
- City Street Fund has a portfolio of $420 million and liabilities of $30 million. Required:a. If there are 30 million shares outstanding, what is the net asset value? b-1. If a large investor redeems 3 million shares, what happens to the portfolio value? (Enter your answer in dollars not in millions.)Kunal Nayyar from California, had $50,000 in investments at the beginning of the year that consisted of a diversified portfolio of stocks (40%), bonds (40%), and cash equivalents (20%). His returns over the last year were 13% on stocks, 6% on bonds, and 1% on cash equivalents.a.) What is Kunal's average return for the year?b.) If Kunal wanted to rebalance his portfolio to its original position, what specific action should he take?Suppose that you invested S400, 000 in U.S Rubber, $600, 000 in Sony, and S 1,000,000 in JVC. Sony is expected to earn 18% and JVC is expected to earn 12%. What is the expected return of your portfolio?