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Question
A pension fund has an average duration of its liabilities equal to 15 years. The fund is looking at 5-year maturity zero-coupon bonds and 4% yield perpetuities to immunize its interest rate risk. How much of its portfolio should it allocate to the zero-coupon bonds to immunize if there are no other assets funding the plan?
A) 52.38%
B) 48.38%
C) 33.58%
D) 25.48%
Answer
This answer is hidden. It contains 109 characters.
Related questions
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A) -10%
B) -20%
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D) -33%
Q:
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Q:
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B) $4.25
C) $7.68
D) $5.20
Q:
Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at ________.
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Q:
A coupon bond that pays interest annually has a par value of $1,000, matures in 5 years, and has a yield to maturity of 12%. If the coupon rate is 9%, the intrinsic value of the bond today will be ________.
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Q:
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Q:
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Q:
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Q:
Day
1 2 3 4 Advances
870 760 960 840 Declines
880 990 790 910 Volume advancing(m)
580 620 480 510 Volume declining(m)
670 580 720 520 Yield on top-rated corporate bonds
6.8
%
6.7
%
6.7
%
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7.4
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7.4
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7.5
%
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Q:
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A) $2.50
B) $2.65
C) $2.89
D) $3.12
Q:
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$
97,406.25 Tuesday
$
98,000.00 Wednesday
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B) 2.6% loss
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Q:
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Q:
Assuming semiannual compounding, a 20-year zero coupon bond with a par value of $1,000 and a required return of 12% would be priced at ________.
A) $97.22
B) $104.49
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Q:
A coupon bond that pays interest semiannually has a par value of $1,000, matures in 8 years, and has a yield to maturity of 6%. If the coupon rate is 7%, the intrinsic value of the bond today will be ________.
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Q:
If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below is possible? Consider each situation independently, and assume the risk-free rate is 5%.
A) Portfolio
Expected Return
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15%
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1.0 B) Portfolio
Expected Return
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20 C) Portfolio
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Q:
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Q:
An investor can design a risky portfolio based on two stocks, A and B. Stock A has an expected return of 21% and a standard deviation of return of 39%. Stock B has an expected return of 14% and a standard deviation of return of 20%. The correlation coefficient between the returns of A and B is .4. The risk-free rate of return is 5%. The standard deviation of returns on the optimal risky portfolio is ________.
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Q:
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Q:
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Q:
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Q:
A 20-year maturity corporate bond has a 6.5% coupon rate (the coupons are paid annually). The bond currently sells for $925.50. A bond market analyst forecasts that in 5 years yields on such bonds will be at 7%. You believe that you will be able to reinvest the coupons earned over the next 5 years at a 6% rate of return. What is your expected annual compound rate of return if you plan on selling the bond in 5 years?
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Q:
You buy a 10-year $1,000 par value zero-coupon bond priced to yield 6%. You do not sell the bond. If you are in a 28% tax bracket, you will owe taxes on this investment after the first year equal to ________.
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Q:
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Q:
Which of the following is not one of the main areas covered in the examinations that must be taken in order to achieve the designation of Chartered Financial Analyst?
A) investment management ethics
B) securities analysis
C) securities marketing techniques
D) portfolio management
Q:
To become a CFA, you must do all of the following except which one?
A) Pass three exams designed to ensure that you have sufficient knowledge of investments.
B) Obtain 3 years of work experience in money management.
C) Become a member of a local Society of the Financial Analysts Federation.
D) Divest all your own stock holdings to eliminate any potential conflicts of interest with client recommendations.
Q:
A ________ insurance policy provides death benefits, with no buildup of cash value.
A) whole-life
B) universal life
C) variable life
D) term life
Q:
In a defined contribution pension plan, the ________ bears all of the fund's investment performance risk.
A) employer
B) employee
C) fund manager
D) government
Q:
When life insurance companies seek long term investments, they are focusing on________.
A) maximizing returns
B) smoothing out long-term returns
C) tax considerations
D) the investment horizon
Q:
One of the major functions of the investment committee is to ________.
A) determine security selection of each portfolio operated by the investment company
B) translate the objectives and constraints of the investment company into an asset universe
C) determine the percentages of each security in the total investment company portfolio
D) calculate and report the overall rate of return to investment company constituents