Q)answer the following questions. topic- fixed income analysis.

Exercise on Duration The Charger Bond Fund (CBF) is considering two bonds as follows: Par Maturit , years Cou on rate Yield to Maturit Periodicit Bond A $100 2 4% Semiannual Bond B $100 5 6% 7% Semiannual The Charger Bond Fund has a two-year investment horizon. a) b) c) d) e) f) g) h) What realized rate of return will CBF achieve from each bond if interest rates don't change? What realized rate of return will CBF achieve if the yield curve shifts up by 100 bps on all securities? What realized rate of return will CBF achieve if the yield curve shifts down by 100 bps on all securities? Calculate the MacAulay and Modified durations of each bond. Assume CBF invests in both bonds with 50:50 weights. What realized rate of return will it achieve over its holding period of two years? Calculate the durations of the portfolio with 50:50 weight. Use the duration formula to calculate the change in portfolio value in response to 100 bps increase/decrease in interest rate. If CBF wants to reduce its portfolio's interest rate sensitivity, which of the two bonds should it weigh more/less?