In: Finance
A portfolio has 3 bonds with semiannual payments of interest.
Bond 1 | Bond 2 | Bond 3 | |
Face Value | 11000 | 15000 | 12000 |
Coupon | 12% | 15% | 10% |
Maturity (Yrs) | 3 | 5 | 4 |
Yield | 10% | 9% | 7% |
Calculate the yield for this portfolio. (assume that interest is paid in the same dates for the 3 bonds).
Bond 1 | Bond 2 | Bond 3 | |
Face Value | 11000 | 15000 | 12000 |
Face Value ($) | 1000 | 1000 | 1000 |
No of Bonds = Tptal Face Value / Face value / Bond | 11 | 15 | 12 |
Coupon | 12% | 15% | 10% |
Coupon Amt($) = Coupon % x Face Value | 120.00 | 150.00 | 100.00 |
Maturity (Yrs) | 3 | 5 | 4 |
Payment Semiannual | Semiannual | Semiannual | Semiannual |
Nof couopon Payments | 6 | 10 | 8 |
Yield | 10% | 9% | 7% |
Effective Yield / Semiaanual = Yield / 2 | 0.05 | 0.045 | 0.035 |
Current Price = | |||
PV(0.05,6,-120)+1000/(1.05)^6 | 1355 | ||
Current price (bond 2) | 1831 | ||
Current price (bond 3) | 1447 | ||
Market Value = CurrenT price x No of Bond | 14908 | 27463 | 17362 |
Total Value of Bond | 59732 | ||
(Total Value = mkt value of bond 1 + 2 + 3) | |||
Proportion of Bond | 25% | 46% | 29% |
[14908/59732 = 25%] | |||
Portfolio Return = Bond proportion in portfolio X respetive return | |||
(25% x 10% + 46% x 9% + 29% x 7%) | 8.67% |
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