Question

In: Finance

You are managing a portfolio of $1 million. Your target duration is 10 years, and you...

You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 9.0%.

a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.)

-zero coupon bond

-perpetuity bond

b. How will these weights change next year if target duration is now nine years? (Round your answers to 2 decimal places.)

-zero coupon bond

-Perpetuity bond

-

Solutions

Expert Solution

jeff jeffy answered 1 day ago
Next > < Previous

Related Solutions

You are managing a portfolio of $1 million. Your target duration is 10 years, and you...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 5.2%. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) Zero-coupon bond % Perpetuity bond % b. How will these weights change next year if target duration is now nine years? (Round your answers...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 5.5%. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) b. How will these weights change next year if target duration is now nine years?
You are managing a portfolio of $1 million. Your target duration is 10 years, and you...
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 6.0%. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) b. How will these weights change next year if target duration is now nine years? (Round your answers to 2 decimal places.)
You are managing a portfolio of $2.1 million. Your target duration is 10 years, and you...
You are managing a portfolio of $2.1 million. Your target duration is 10 years, and you can choose from two bonds: a zero-coupon bond with maturity 5 years, and a perpetuity, each currently yielding 5%. Required: (a) How much of each bond will you hold in your portfolio? (Round your answers to 4 decimal places.)   Zero-coupon bond      Perpetuity bond    (b) How will these fractions change next year if target duration is now nine years? (Round your answers to...
4. You are managing a bond portfolio of $1 million. Your target duration is 10 years,...
4. You are managing a bond portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a zero-coupon bond with maturity of 15 years, each currently yielding 5%. (1) What are your weights in these two zero-coupon bonds to have the target duration? (2) How will these factions change next year if the target duration is still ten years? .
You are managing a portfolio of $1 million. Your target duration is 3 years, and you...
You are managing a portfolio of $1 million. Your target duration is 3 years, and you can choose from two bonds: a zero-coupon bond with time to maturity of 5 years, and a bond with an annual coupon rate of 8% and time to maturity of 2 years, both with yield to maturity of 5%. Assume both bonds have a face value of $1000. (a) how much of each bond will you hold in your portfolio (b) how will these...
You are managing a portfolio of $1.0 million. Your target duration is 15 years, and you...
You are managing a portfolio of $1.0 million. Your target duration is 15 years, and you can choose from two bonds: a zero-coupon bond with maturity five years, and a perpetuity, each currently yielding 5%. a. How much of (i) the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio? Zero-coupon bond ___ % Perpetuity bond ____ % How will these fractions change next year if target duration is now fourteen years? Zero-coupon bond ___ % Perpetuity...
You are managing a portfolio of $1.0 million. Your target duration is 29 years, and you...
You are managing a portfolio of $1.0 million. Your target duration is 29 years, and you can choose from two bonds: a zero-coupon bond with maturity five years, and a perpetuity, each currently yielding 2%. a. How much of (i) the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. How will these fractions change next year if target duration is now twenty eight...
Tony, a fixed-income portfolio manager, is managing a portfolio of $10 million. His target duration is...
Tony, a fixed-income portfolio manager, is managing a portfolio of $10 million. His target duration is 7 years, and he can choose from two bonds: a zero-coupon bond with maturity of 3 years, and a perpetuity, each currently yielding 8%. i. What is the weighting of each bond will Tony hold in his portfolio? ii. Suppose that a year has passed and the yield has fallen to 6%. What will these weightings be if target duration is now 6 years?
b. Tony, a fixed-income portfolio manager, is managing a portfolio of $10 million. His target duration...
b. Tony, a fixed-income portfolio manager, is managing a portfolio of $10 million. His target duration is 7 years, and he can choose from two bonds: a zero-coupon bond with maturity of 3 years, and a perpetuity, each currently yielding 8%. i. What is the weighting of each bond will Tony hold in his portfolio? ii. Suppose that a year has passed and the yield has fallen to 6%. What will these weightings be if target duration is now 6...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT