The Excel file Portfolio Bond Immunization Data contains information about three bonds. Use this data to: Yield to maturity (Expected/Current) 9%     Number of Years to Future Liability 9.00     Future Liability $7,500                       Bond 1 Bond 2 Bond 3 Coupon rate 6.00% 7.000% 8.00% Maturity 12 18 24 Face value 1,000 1,000 1,000 Compute the amount to be invested to meet the future liability noted in the data. This future liability is due in 9 years. Find a combination of Bond 1 and Bond 2 having a target duration of 9 years. Find a combination of Bond 1 and Bond 3 having a target duration of 9 years. Perform an analysis using a data table and an accompanying graph to determine which portfolio would be preferred to attempt to immunize this obligation. Construct a data table by varying the yield to maturity that shows the value of each portfolio at the end of 9 years. Based on your data table, construct a graph that demonstrates the performance of these two portfolios. Explain which portfolio you prefer to use to attempt to immunize this obligation which is due in 9 years. Analyze each portfolio’s performance in attempting to achieve immunization. Please show work in excel and functions/equations used.

Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter11: Bond Pricing And Amortization (bonds)
Section: Chapter Questions
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The Excel file Portfolio Bond Immunization Data contains information about three bonds. Use this data to:

Yield to maturity (Expected/Current) 9%    
Number of Years to Future Liability 9.00    
Future Liability $7,500    
       
       
  Bond 1 Bond 2 Bond 3
Coupon rate 6.00% 7.000% 8.00%
Maturity 12 18 24
Face value 1,000 1,000 1,000
    1. Compute the amount to be invested to meet the future liability noted in the data. This future liability is due in 9 years.
    2. Find a combination of Bond 1 and Bond 2 having a target duration of 9 years.
    3. Find a combination of Bond 1 and Bond 3 having a target duration of 9 years.
    4. Perform an analysis using a data table and an accompanying graph to determine which portfolio would be preferred to attempt to immunize this obligation.
      1. Construct a data table by varying the yield to maturity that shows the value of each portfolio at the end of 9 years.
      2. Based on your data table, construct a graph that demonstrates the performance of these two portfolios.
    5. Explain which portfolio you prefer to use to attempt to immunize this obligation which is due in 9 years.
    6. Analyze each portfolio’s performance in attempting to achieve immunization.

Please show work in excel and functions/equations used.

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