Question
Bank Portfolio Manager In this scenario, you are very concerned about the FDIC regulations and can only invest in Investment Grade fixed income products. While
Bank Portfolio Manager In this scenario, you are very concerned about the FDIC regulations and can only invest in Investment Grade fixed income products. While a higher yield is of value, safety of principle and low volatility are just as important. Also, you need to try to attain at least a 3% spread above the average 0.5% you are currently paying customers on money markets, CDs, and savings accounts to remain profitable. There is also a concern that the short-term borrowing rate (liabilities) may exceed the long- term investments (assets) you make. If this occurs the bank could lose money and may need to spend capital to purchase interest rate swaps; thereby, losing yield on its investments.
Based on your knowledge, both explain and demonstrate mathematically how and why you constructed your portfolio to meet the above standards. Make sure you compare the importance and contrasts between; yield, risk/return, duration, and convexity for your particular investment strategy. INCLUDE ANY NECESSARY EXCEL FILES. 2. Demonstrate what happens to the value of both every individual fixed income investment and the entire portfolio (both in total $ and as a percentage of the portfolio value) when interest increase by 1%. INCLUDE ANY NECESSARY EXCEL FILES. 3. Demonstrate what happens to the value of both every individual fixed income investment and the entire portfolio (both in total $ and as a percentage of the portfolio value) when interest decrease by 1%. INCLUDE ANY NECESSARY EXCEL FILES. 4. You must invest around $100,000,000 into at least 15 different investments in at least 3 different investment categories. The portfolio must be well balanced as a percentage of investments.
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