Accounting
Anthropology
Archaeology
Art History
Banking
Biology & Life Science
Business
Business Communication
Business Development
Business Ethics
Business Law
Chemistry
Communication
Computer Science
Counseling
Criminal Law
Curriculum & Instruction
Design
Earth Science
Economic
Education
Engineering
Finance
History & Theory
Humanities
Human Resource
International Business
Investments & Securities
Journalism
Law
Management
Marketing
Medicine
Medicine & Health Science
Nursing
Philosophy
Physic
Psychology
Real Estate
Science
Social Science
Sociology
Special Education
Speech
Visual Arts
Question
You are asked to invest $30 million in a bond portfolio consisting of only two bonds. Bond A has a duration of 4.36 years, and bond B has a duration of 6.50 years. The portfolio is to have an investment horizon of 5 years. How much of each bond issue would you have to buy to immunize the portfolio?Answer
This answer is hidden. It contains 251 characters.
Related questions
Q:
Explain the life-cycle theory of portfolio policies.
Q:
Portfolio performance evaluation is an important determinant of your success in financial planning.
Q:
Compare the obligation entered into in a futures contract to the obligation in an options contract.
Q:
Explain a long position and a short position in futures trading.
Q:
What are "earnings surprises?" How do they affect stock prices?
Q:
How accurate are professional earnings estimates? Do purely mechanical models give better results than analysts who add subjective assessment to the data?
Q:
When an investor buys a share of common stock he/she buys a claim of ownership. How is this claim represented on the balance sheet?
Q:
If the economy is prospering, investors expect corporate earnings to rise.
Q:
If interest rates rise, the risk free rate of return declines.
Q:
The typical business cycle in the United States seems to lead the stock market's turning point by a few months.
Q:
Other things equal, the higher the required return, the lower the P/E.
Q:
Unlike discounted cash flow techniques, relative valuation does not require comparatively strong assumptions about the inputs that lead to an estimate of stock value.
Q:
If all investors use the constant growth dividend model to value the same stock, they will all arrive at the same estimate of value.
Q:
The SIPC limit for insurance coverage on cash is _____________________.
Q:
An investor buys 100 shares of Walmart at $45 per share on margin with an initial margin of 70 percent and a maintenance margin of 25% percent. In two months, the stock goes to $56. What is the actual margin of the stock when it's at $56?65.9%75.9%79.9% 80.9%
Q:
Margin Call price is the amount borrowed divided by: a. number of shares x (1 - initial margin proportion) b. number of shares x (1 - maintenance margin proportion) c. current value of the shares purchased x (1 - initial margin proportion) d. current value of the shares purchased x (1 - maintenance margin proportion)
Q:
Since 1974, the current initial margin requirement on stock is: a. 30 percent.b. 40 percent.c. 50 percent.d. 60 percent.
Q:
The initial margin requirement on security trades is set by the: a. SECb. FINRAc. SIPCd. Federal Reserve
Q:
Buying shares of a mutual fund is an example of indirect investing.
Q:
What are some advantages of asset-backed securities to investors?
Q:
Rank (lowest to highest) the following securities in terms of the risk-expected return tradeoff from the investors' viewpoint: common stock, corporate bonds, U. S. Treasury bonds, options, preferred stock..
Q:
Compare the cash flows an investor expects from coupon bonds, zero-coupon bonds, and preferred stock.
Q:
Briefly explain the difference between expected returns and realized returns and between ex ante returns an ex post returns.
Q:
Due to the Internet, institutional investors have gained in importance.
Q:
The minimum actual return necessary to induce investors to invest is known as the expected return.
Q:
A pension fund holds $10 million in Treasury bonds. In order to protect against a rise in interest rate, the pension fund should use a short hedge in T-bond futures.
Q:
An anticipatory hedge is when an investor anticipates a falling market and liquidates his position.
Q:
Owning two securities instead of one will not reduce the risk taken by an investor if the two securities are
a. perfectly positively correlated with each other
b. perfectly independent of each other
c. perfectly negatively correlated with each other
d. of the same category, e.g. blue chips
Q:
Which of the following bonds will be most sensitive to changes in market interest rates?
a) 8 percent semiannual coupon with 8 years to maturity.
b) 6 percent semiannual coupon with 8 years to maturity.
c) 8 percent semiannual coupon with 6 years to maturity.
d) 6 percent semiannual coupon with 6 years to maturity.
Q:
If the dividend growth rate increases for a firm, its P/E will ---------, other things the same.
a. increase
b. stay the same
c. decrease
d. increase or decrease but not stay the same