Sanofi Limited is considering three bonds for investment, A: Rs 1,000, B: Rs 1,000

and C: Rs 1,00. Coupon (interest rate) payable annually bonds are, A: 12 percent, B:

13 and C: 14. The Years to maturity for the bonds are:

A: 5, B:6, C: 7 and the redemption value for Bonds A:1,000, B: 1,000 and C:100. The

ccurrent market price for bonds: A: Rs.900, B: Rs.850, C: 92.

One of the directors in a board meeting argued that: "Harry Markowitz, the pioneer of

modern portfolio theory, developed the theory of mean-variance portfolios, one of the

pillar of standard finance. However, when it came time to choose his own retirement

portfolio, Harry Markowitz played it the behavioural way that is based on framework

dependence, Heuristic-Driven Bias and emotional time line. The board ask you to to

give a detail report on the following questions raised by members:

1. Explain briefly the following concepts: Framework dependence, Heuristic-

Driven Bias and Emotional Time Line.

What are the (a) yields to maturity (use the approximate formula) (b)

durations, and (c) volatilities of these bonds that Sanofi is planning to invest?