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Help! 2. A fund manager invests in a portfolio consisting of 2 bonds. B1 is a 3 years bond with 696 coupon rate payable annually
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2. A fund manager invests in a portfolio consisting of 2 bonds. B1 is a 3 years bond with 696 coupon rate payable annually and par value $100; B2 is a 5 years bond with 8% coupon payable semiannually and with a redemption/lump sum repayment of $100. Both bonds have a price of $90.465. Assuming the reinvestment rate is 5%. a) Fill in the following table of cash flows for B1 and the portfolio, leave the cells blank if no values should be filled in (23 marks). Periods BI Cash flow B2 Cash flow Portfolio Cash flow 1 2 3 4 5 6 7 8 9 10 b) Calculate the total return for B2 (6 marks). c) Calculate the total return for the portfolio (6marks) Step by Step Solution
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