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5. (15 points) You manage a pension fund with perpetual annual obligations of $5M. The current YTM is 10% (a) (5 points) Create a strategy

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5. (15 points) You manage a pension fund with perpetual annual obligations of $5M. The current YTM is 10% (a) (5 points) Create a strategy using zero-coupon bonds to immunize your portfolio from interest rate movements. (b) (5 points) How many zero-coupon bonds with a par value of $1,000 will you need to purchase to meet your obligations? Double-click to hide white space (C) (5 points) If the convexity of a zero-coupon bond with a duration of 5 years and par value of $1,000 and YTM of 10% is 24.793, estimate the new price of the zero-coupon bond in part c if YTM decreases by 5% using the bond's duration and convexity. What is the difference between your estimated price and the actal new price? 5. (15 points) You manage a pension fund with perpetual annual obligations of $5M. The current YTM is 10% (a) (5 points) Create a strategy using zero-coupon bonds to immunize your portfolio from interest rate movements. (b) (5 points) How many zero-coupon bonds with a par value of $1,000 will you need to purchase to meet your obligations? Double-click to hide white space (C) (5 points) If the convexity of a zero-coupon bond with a duration of 5 years and par value of $1,000 and YTM of 10% is 24.793, estimate the new price of the zero-coupon bond in part c if YTM decreases by 5% using the bond's duration and convexity. What is the difference between your estimated price and the actal new price

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