Provide correct answers to the questions in the attched document.

At the present time, you expect a decline in interest rates and must choose between two portfolios of bonds with the following characteristics: Average maturity Average YTM Modified Duration Modified Convexity Call features Portfolio A 10.5 years 7% 5.7 years 125.18 Noncallable Portfolio B 10.0 years 4.9 years 40.30 Deferred call features that range from I to 3 years ii. iii. iv. v. Select one of the portfolios and discuss three factors that would justify your selection. (9 marks) Identify the direction of change in modified duration of Portfolio A if the YTM was 9 percent, not 7 percent. (2 marks) Using modified duration, what is the approximate percentage change in Portfolio A if interest rates fell by 125 basis points? If the Portfolio value before yields changed was $850, what is the resulting value after the 125 basis point decrease? (6 marks) Would the actual percentage change in Portfolio A be greater than or less than the estimated change using modified duration? Explain. What other measure/factor would improve the accuracy of the estimated price change due to changes in interest rates? (6 marks) What is the maximum price that an 8% coupon, 15-year Corporate bond could theoretically sell for, assuming $1,000 par value. (3 marks)