extra work

extra work - E00858464 Ju shengyang Investment extra work...

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E00858464 Ju shengyang Investment extra work Professor Kiss Case problem 11.2 Grace Decides to immunize Her portfolio Answers: a) Bond 1 2 3 4 Current yield 8.38% 0.00% 9.26% 9.44% Promised yield 8.96% 9.46% 8.77% 9.51% b) Bond 1 12 years 7.5% YTM 9% Year(t) Annual Cash Flow Ct PVIF PVCt PVCt Divided by Price Time Weighted Re 1 $75 0.92 $68.78 0.0768 0.0768 2 $75 0.84 $63.15 0.0706 0.1411 3 $75 0.77 $57.90 0.0647 0.1941 4 $75 0.71 $53.10 0.0593 0.2373 5 $75 0.650 $48.75 0.0545 0.2723 6 $75 0.6 $44.70 0.0499 0.2997 7 $75 0.55 $41.03 0.0458 0.3209 8 $75 0.5 $37.65 0.0421 0.3365 9 $75 0.46 $34.50 0.0385 0.3469 10 $75 0.42 $31.65 0.0354 0.3536 11 $75 0.39 $29.10 0.0325 0.3577 12 $1,075 0.36 $382.70 0.4276 5.1312 Macaulay Duration 8.0682 Modified duration 7.40 Percent change -5.55% If interest rate rise 75 basis ponit in bond price 5.55% If interest rate drop 75 basis ponit
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Bond 2 10 years zero coupon MRT 405 Because it is a zero coupond bond so the Duration will maintain 10 years Percent change -7.50% If interest rate rise 75 basis ponit
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extra work - E00858464 Ju shengyang Investment extra work...

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