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Use the following information to answer questions b 8. c. Stanbic Fixed Income Securities Kefasi Mashanda is a portfolio manager at Stanbic Fixed Income Securities {SFIS}. which has entered into a contract to pay a single payment of R109,DUU.DDD in 5 years with a yield to maturity of approximately 6.11% Mashanda calculates the present value of this contract to be RT4.339,294. This is the amount he intends to invest today to immunize the contract. Mashanda is building a suitable portfolio and already holds the RSA government bonds shown in Exhibit 2. assuming coupons are paid annually. Exhibit 2 Existing Portfolio Bonds Bond Market Price Total Market Value Duration Total Rand (R) {R} Duration Bond R 99.53 30,639,442 612,?99 Bond T 95.09 41 231.93? 2,961.59? Mashanda must choose a RSA government bond to complete the immunized portfolio. He has gathered the data shown in Exhibit 3. Exhibit 3 Bonds Available to Complete lmmunized Portfolio Bond Market Yield to Modied Price Maturity Duration R 101.10 3.52% 22.4400 90.10 3.80% 42.2453 99.97 3.85% 45.9510 b) Calculate the duration of Bond R and Bond T. [2) c) Determine which bond (A, E5, or C) is the most suitable for Mashanda to complete the immunized portfolio. .Justifg,r your response. (3) Use the following information to answer questions of 8; e. A client of Mashanda, Grace Mugabe Safaris , has entered into a transaction requiring a payment of R90.000,000 in 3 years. Grace Mugabe Safaris (GMS) has R 75,000,000 available to meet this liability. Mashanda recommends a technique called contingent immunization. Under certain market conditions. this technique can provide GMS with a safety margin or cushion in meeting its liability. He notes that an RSA government bond with a bond equivalent yield of 7.5 % is available. GMS agrees to implement contingent immunization using this bond. d) Calculate the initial rand safety margin. [3) e) Discuss the main advantage to GMS of using contingent immunization rather than classical immunization. [2)