Tutorial+18 - BUS3026W Finance II 2009 - Tutorial 18 Due:...

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1 BUS3026W Finance II 2009 - Tutorial 18 Due: Monday 5 th October 09 QUESTION 1 Bond A is a coupon bond with a modified duration of 13.1 years. Bond B is also a zero coupon bond with a modified duration of 7 years. A bond portfolio manager has R145m invested in bond A. How much worth of Bond B should the manager go long/short in order to: a) Reduce the modified duration of his net portfolio to 9 years b) Reduce the modified duration of his net portfolio to 4 years c) Reduce the modified duration to 0. QUESTION 2 You have entered into a long position for 200 index futures contracts in the JSE ALSI TOP40 Index. The contract multiplier is 10 and the index level is currently 7213. The 6-month JIBAR is 8.27% NACC, and the continuously compounded dividend yield is 2% per annum. You hold the following position A long position for 200 index futures contracts in the JSE ALSI TOP40 Index. 200 long put options on the JSE RESI Index. The option contracts are each currently worth R30 540 each, and
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This note was uploaded on 06/01/2011 for the course FIN 3026W taught by Professor Drtoerien during the Summer '09 term at University of Cape Town.

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Tutorial+18 - BUS3026W Finance II 2009 - Tutorial 18 Due:...

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