A major requirement in managing a fixed-income portfolio using a contingent immunization policy is monitoring the relationship between the current market value of the portfolio and the required value of the floor portfolio. This difference is defined as the margin of error. In this regard, assume a $400 million portfolio with a time horizon of five years. The available market rate at the initiation of the portfolio is 11%, but the client is willing to accept 10% as a floor rate to allow use of active management strategies. The current market values and current market rates at the end of Years 1, 2, and 3 are as follows:

End of Year	Market Value ($ Mil)		Market Yield
1	$446.5		12	%
2	528.7		8
3	538.9		10

Assume that semiannual compounding is used. Do not round intermediate calculations. Enter your answers in millions. For example, an answer of $1.20 million should be entered as 1.20, not 1,200,000. Round your answers to two decimal places.

1. Calculate the required ending-wealth value for this portfolio.

   $ million

2. Calculate the required ending-wealth value for this portfolio at the end of Years 1, 2, and 3.

   End of Year 1: $ million

   End of Year 2: $ million

   End of Year 3: $ million

3. Compute the margin of error at the end of Years 1, 2, and 3.

   End of Year 1: $ million

   End of Year 2: $ million

   End of Year 3: $ million

4. Indicate the action that a portfolio manager utilizing a contingent immunization policy would take if the margin of error at the end of any year had been zero or negative.

   If the margin of error at the end of any year had been zero or negative, the portfolio manager would -Select-discontinuecontinueItem 8 active management of the portfolio and immunize it.

Chapter 13: Assignment-Bond Analysis and Portfolio Management Strategies Search one X ebook Problem 13-11 A mayor requirement in managing the income portfolosing content to the went to the other the floor portfolio. This difference is defined as the margin or ringar $100 ton of five year. The www 11 but the clients willing to co 10% rate to allow softve management The current and current market weetheart, fois End of Year Market Value (MI) Market Yield 5446,5 12 520. 1389 10 Are that some compounding is ved. Do not found intelection your answers in 30 min 1.0 Round your answers to two decimal a. Calculate the required ending wealth value for this portion $ million Calculate the required ending wealth value for this portat the end of Year 1.2 and End of Year 13 milion End of Year million End of Years mo Compute the margin of erro at the end of Years 1, 2, and End of Years mo End of Year 2 million End of Year 4. Indicate the action that portfolio Manager will contingent immunication that may alert at the verhalten If the margin of error at the end of any year had been or the portfolio manager active management of the port Chapter 13: Assignment-Bond Analysis and Portfolio Management Strategies Search one X ebook Problem 13-11 A mayor requirement in managing the income portfolosing content to the went to the other the floor portfolio. This difference is defined as the margin or ringar $100 ton of five year. The www 11 but the clients willing to co 10% rate to allow softve management The current and current market weetheart, fois End of Year Market Value (MI) Market Yield 5446,5 12 520. 1389 10 Are that some compounding is ved. Do not found intelection your answers in 30 min 1.0 Round your answers to two decimal a. Calculate the required ending wealth value for this portion $ million Calculate the required ending wealth value for this portat the end of Year 1.2 and End of Year 13 milion End of Year million End of Years mo Compute the margin of erro at the end of Years 1, 2, and End of Years mo End of Year 2 million End of Year 4. Indicate the action that portfolio Manager will contingent immunication that may alert at the verhalten If the margin of error at the end of any year had been or the portfolio manager active management of the port