Question
You are managing an investment portfolio X on behalf of your clients. Assume the assets within portfolio X belong to three asset classes: stocks, fixed
You are managing an investment portfolio X on behalf of your clients. Assume the assets within portfolio X belong to three asset classes: stocks, fixed income and cash, with weights 60%, 9% and 31%. Suppose the benchmark index weights had been set at 65% equity, 18% bonds and 17% money market. The return of the benchmark index and the managed portfolio X for each asset class for last year were as follows: a.Calculate the excess return of portfolio X.[3 marks] b.Lets focus on the bond asset classes among the portfolio X. You have a one-year,$100,000 bond carries a coupon rate of 10%. The bond will make the payment of accruedinterest and one-half of the principal at the end of six months. The remaining principal andaccrued interest are due at the end of the year. If the required yield is 20% annually, what is the duration of the bond? [Please keep three decimals]. [5 marks
Portfolio X Benchmark Index 6.50% Stocks 8.28% Bonds 2.89% 1.45% Money Market 0.30% 0.68%Step by Step Solution
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