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Elementary,Middle School,High School,College,University,PHD
| Teaching Since: | May 2017 |
| Last Sign in: | 398 Weeks Ago, 2 Days Ago |
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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016

Show transcribed image text Consider the four bonds having annual payments as shown below: They are traded to produce a 15% yield. Determine the price of each bond. Determine the duration of each bond. Which bond is most sensitive to a change in yield? Suppose that you owe $2,000 at the end of 2 years. Concern about interest rate risk suggests that a portfolio consisting of the bonds and the obligation should be immunized. If Va, Vb, Vc and VD are the total values of bonds purchased of type A, B, C and D respectively, what are the necessary constraints to implement the immunization? In order to immunize the portfolio, you decide to use bond C and one other bond. Which other bond should you choose? Find the amount (in total value) of each of these to purchase. You decided in (e) to use bond C in the immunization. Would other choices, including perhaps a combination of bonds, leads to a lower total cost?
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