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b) As a fixed-income portfolio manager, you are required to demonstrate for your client on how you would follow the contingent immunization strategy to manage
b) As a fixed-income portfolio manager, you are required to demonstrate for your client on how you would follow the contingent immunization strategy to manage RM500 million portfolio for the investment horizon of five years. Assume that your client is willing to accept a 8% as a minimum rate of return which is two percent below the current available market rate. Assume that the market value and current market rates at the end of year one are RM450 and 9%, respectively. While the market value and current market rates at the end of year two are RM520 and 7%, respectively. It is also assumed that at the end of year three, the market value and current market rates are RM525 and 6%, respectively. Support your answer on how you would follow contingent immunization strategy by showing the calculation for the first three years, assuming a semi-annual compounding. (15 marks) b) As a fixed-income portfolio manager, you are required to demonstrate for your client on how you would follow the contingent immunization strategy to manage RM500 million portfolio for the investment horizon of five years. Assume that your client is willing to accept a 8% as a minimum rate of return which is two percent below the current available market rate. Assume that the market value and current market rates at the end of year one are RM450 and 9%, respectively. While the market value and current market rates at the end of year two are RM520 and 7%, respectively. It is also assumed that at the end of year three, the market value and current market rates are RM525 and 6%, respectively. Support your answer on how you would follow contingent immunization strategy by showing the calculation for the first three years, assuming a semi-annual compounding. (15 marks)
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