Question 7

1.You have a planning horizon of 10 years and wish to immunize your investment over that horizon. To do so, you have two financial instruments available: A and B. Instrument A has a duration of 6 years, and instrument B has a duration of 18 years. Find the proportion of your money that you need to invest in instrument A in order to achieve your immunization goal. Give the answer as a percentage with two decimals; e.g., 23.55, but as always do not write the % sign.

Question 8

1.What is the maximum possible price of a 10-year bond with a coupon rate (CR) of 18% and a face value of $1,000. Assume annual coupon payments.

Question 9

1.A two-year financial instrument produces $164 in year t = 1 and $33 in year t = 2. Find the weight corresponding to t = 1, w1, in the definition of duration as a weighted average of the times at which the cash flows occur: D = 1*w1 + 2*w2. Assume the discount rate is 8% p.a. Give the answer as a percent with 2 decimals; e.g., 6.20%

Question 10

1.You own a portfolio consisting solely of two stocks, A and B. Stock A has a duration of Da = 4.3 years and stock B has Db

Question 11

1.You have a planning horizon of H = 6 years and with to immunize your investment for that horizon. You attempt to do so by buying a perpetual bond that pays $100 annually and has a YTM of 20% p.a. You will reinvest the coupons throughout this 6-year period and, additionally, at the end of that 6-year period. Find the total cash flow you will have 6 years from now if interest rates remain unchanged throughout your planning horizon. Give the answer with two decimals; e.g., 1,234.56. As always, do not include the dollar sign in your answer.