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- Assignement B Abacus Ltd is an investment fund that specializes in fixed income securities. At the end of2010 the fund’s bond portfolio has the following information BOND YIELD TO MATURITY PRICE DURATION CONVEXITY A 12% 1045 2.35 16.46 B 14% 2265 4.26 22.80 C 8% 1430 3.45 11.96 D 10% 1100 4.20 15.56 Assume that the yield to maturity on each bond increases by 4%, calculate(i) The percentage by which the price of each bond will decrease(ii) The amount in cedis by which the price of each bond will decrease (iii) The percentage and the cedi decrease in the total value of the portfolio.Based on the information above: ii. Chris Johnson fund managers has proposed him to invest on JigsawBerhad where the firm is setting the terms on a new issue of bonds withwarrants. The bonds will have a 30-year maturity and annual interestpayments. Each bond will come with 20 warrants that give the holder theright to purchase one share of share per warrant. The fund managerestimate that the value of each warrant will be RM10.50. The interest rateis 10 percent. Calculate the coupon rate should be set on the bonds-withwarrants so that the package would sell for RM1,000.A pension fund faces a promised outflow of $5 million in 6 years. Its managers plan to dedicate a portfolio comprised of the following two bonds to meet this obligation. a. What must be the proportions ((W7, W6) or (Weight(A), Weight(B)) of the two bonds in this 2-security portfolio to immunize it against changes in interest rates? b. What is the yield to maturity for the immunized portfolio? c. How much needs to be invested in each bond to build an immunized portfolio with an expected value of $5 million in 6 years? d. Suppose that it is now 3 years later and that there has been a parallel increase in interest rates of 2%. Explain how immunization at least partially protects this portfolio. That is, what are the sources of losses and gains associated with each of the bonds caused by the increase in interest rates? How do they offset each other?
- NBP Sarmaya Izafa Fund is attempting to balance one of the bond portfolios under its management. The fund has identified three bonds which have five-year maturities and which trade at a YTM of 9 percent. The bonds differ only in that the coupons are 7 percent, 9 percent, and 11 percent. a. What does the concept of duration mean in context of security valuation? b. On what factors duration of a bond depends and what relation duration has with those factors? c. Calculate the duration of the tree bonds as described in para above. d. Plot the relation between duration and coupon rateA pension fund's liabilities has a PV01 of $200 million. The plan has $100 billion of assets with a weighted average modified duration of 8. The highest duration bond that the plan can invest in has a modified duration of 28. How much of the existing assets should be invested in this bond with a modified duration of 28 to minimize the interest risk exposure of the fund? A. $0 B. $20 billion C. $40 billion D. $60 Billion. Need typed answer only.Please give answer within 45 minutesAbacus Ltd is an investment fund that specializes in fixed-income securities. At the end of 2010, the fund’s bond portfolio has the following information Bonds Yield to maturity Price Duration Convexity A 12% 1045 2.35 16.46 B 14% 2265 4.26 22.80 C 8% 1430 3.45 11.96 D 10% 1100 4.20 15.56 Assume that the yield to maturity on each bond increases by 4%, calculate(i) The percentage by which the price of each bond will decrease.(ii) The amount in cedis by which the price of each bond will decrease.(iii) The percentage and the cedi decrease in the total value of the portfolio.
- S3 Q16 Ms. Elpram manages a bond portfolio valued at $105 million. The bonds in this portfolio have a face value of $100 million. The portfolio has a yield of 8.5% and a duration of 8.6. Ms. Elpram is worried that interest rates will rise within the next year. She would like to lower the duration of the bond portfolio to six years. She finds a one year bond futures contract and thinks that it would be an appropriate hedge for the portfolio. This futures contract is priced at 107 20/32, an implied yield of 8%, and an implied duration of 7.5 years. The futures contract size is $100,000. Should Ms. Elpram buy or sell futures?An investor has $633,000 to invest in bonds. Bond A yields an average of 8% and the bond B yields 5%. The investor requires that at least 3 times as much money be invested in bond A as in bond B. You must invest in these bonds to maximize his return. This can be set up as a linear programming problem. Introduce the decision variables: ?=dollars invested in bond A ?=dollars invested in bond B Compute ?+? $ ________. Round to the nearest cent.1 ) Solve the following quesitons in an Excels spreadsheet, and create a cash-flow table for each Bond A and Bond B over 6 years. a) Calculate the yield rates for two bonds described below. b) Correctly use Rate of Return (ROR) analysis to determine which, if either, bond an investor with a MARR of 10%, should purchase. c) Confirm your answer to part (b) using Present Worth Analysis. Type out formulas used and calculations performed. d) Confirm your answer to part (b) using Annual Worth Analysis. Type out formulas used and calculations performed.
- 8- Suppose that, as a fund manager, you purchase 5.000 bonds of Company X on 1 Jan. 2022 for 1.000 TL each in order to earn coupon payments or sell when available. Simultaneously, you also purchase 4.000 bonds of Company Y for 750 TL each for trading purposes. The price of the bonds of Company X increases to 1.200 TL first, but after some days it drops to 1.120 TL and you immediately sell half of the bonds. On the other hand, the price of the bonds of Company Y drops to 700 TL first, but after some days it increases to 760 TL and you immediately sell half of the bonds. Assuming that there are no more price movements throughout the year, what would be the profit or loss as of the year end? a) 300.000 TL profit b) 200.000 TL loss c) 220.000 TL profit d) 120.000 TL loss1. City Street Fund has a portfolio of $400 million and liabilities of $12 million. If there are 50 million shares outstanding, what is net asset value? (Round your answer to 2 decimal places.) 2. During a period of severe inflation, a bond offered a nominal HPR of 83% per year. The inflation rate was 74% per year. a. What was the real HPR on the bond over the year? (Round your answer to 2 decimal places.) b. Find the approximation rreal ≈ rnom – i.Y8 Here are data on $1,000 par value bonds issued by Caterpillar and Intel. Assume you are thinking about buying these bonds. CaterpillarIntelCoupon5%4%Years to Maturity810Required Return4%5% Answer the following questions: a) Assuming interest is paid annually, calculate the values of each of the bonds b) How would these values change if the coupon was paid semiannually ( c) Assume that the bonds with the coupon that is paid annually (point a) are selling for the following amounts: · Caterpillar $1,050 · Intel $980 What are the expected rates of return (YTM) for each bond? d) How would change the price of each bond if the required rate of return (current 4% for Caterpillar and 5% for the Intel and with annual coupon) increased by 2% What will you deduce about the relationship between market interest rate and bond prices? .