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2. () An immunized bond portfolio is that which, for a given fixed target date, gives the holder a fixed return no matter what happens
2. () An immunized bond portfolio is that which, for a given fixed target date, gives the holder a fixed return no matter what happens to interest rates from the initial date and the future target date. (a) Suppose that you have $1000 and you want to construct an immunized portfolio with a target date of three years. You can only trade on the bonds from the previous problem. What bonds would you buy and in what amounts? What return will you get? (b) Suppose that you want to construct an immunized portfolio with a target date of 2 years. You can only trade on the bonds from the previous problem. What bonds would you buy and in what amounts? What return will you get? (c) How do the rates of return from the previous questions relate to the yields to maturity of the three bonds from the previous question? 2. () An immunized bond portfolio is that which, for a given fixed target date, gives the holder a fixed return no matter what happens to interest rates from the initial date and the future target date. (a) Suppose that you have $1000 and you want to construct an immunized portfolio with a target date of three years. You can only trade on the bonds from the previous problem. What bonds would you buy and in what amounts? What return will you get? (b) Suppose that you want to construct an immunized portfolio with a target date of 2 years. You can only trade on the bonds from the previous problem. What bonds would you buy and in what amounts? What return will you get? (c) How do the rates of return from the previous questions relate to the yields to maturity of the three bonds from the previous
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