1. Assume that some company must cover financial liability of 1 million dollars after 3 years. Unfortunately there are no 3-year zero-coupon bonds on market, which will be perfect solution. There are available three types of bonds, which pays coupons annually. Their parameters are presented in the table below. Bond Coupon rate Maturity YTM A 6% 10 years 10% B 11% 2 years 10% C 9% 5 years 10% a) Calculate the price for each bond. b) Calculate the duration for each bond. c) Find percentage share of portfolio, which duration is 3 years and has only bonds A and B. d) What is the value of the portfolio from case c) after each year over 10 years. 2. You have invested $50,000 in the 4-year bonds paying 12% interest annually with a $100 par value and price of 96%. After each year you reinvest coupons in the same bonds. a) How many the 4-year bonds can you purchase? b) Calculate the YTM for the 4-year bond. c) How many bonds can you purchase after 1 year? d) What is the price of the bond after 2 years? e) What is the invested capital after 2 years? 3. A pension fund manager is considering two mutual funds. The first is a stock fund and the second is a long-term corporate bond fund. The probability distribution of the risky funds is as follows: Expected return. Standard deviation Stock fund (S). 20%. 30% Bond fund (B). 12%. 15% The correlation between the fund return is 0.10. a) You require that your portfolio is the minimum-variance portfolio (MVP) of the two risky funds. What is the investment proportion in the MVP of the two risky funds? What is the expected value and standard deviation of MVP's rate of return? b) You require that your portfolio yields an expected return of 14% and that it be efficient. What is the investment proportion in that portfolio of the two risky funds? What is the standard deviation of that portfolio's rate of return