Consider two portfolios-what are the key rate durations

Assignment Help Financial Management

Reference no: EM131862085

Consider two portfolios A and B. The details are as follows

Portfolio A: Six 12% coupon 2-Year Bonds, eight 3-Year 6% coupon Bonds

Portfolio B: Five 10% coupon 1-Year Bonds, seven 3-Year 9% coupon Bonds. The current term structure is as follows

1-Year: 5%, 2-Year: 5.35%, 3-Year: 5.85%, 4-Year: 5.95%,

What are the key rate Durations for the one, two and three years of each portfolio, their effective durations and what are the changes in value for a 50bps increase in the 1-year rate, 50 bps decrease in the two year rate and a 25 bps increase in the 3-Year rate. Assume annual coupons.

Reference no: EM131862085

Questions Cloud

Explain what had the greatest effect on you : What I have learned is Integration in Healthcare? What had the greatest effect on you? What were you surprised about? What can you use in your daily life?

Identify the role of formal logic in philosophy : To define the outlines of the two great schools of thought in classical theory of knowledge, the empiricist and rationalist

Analysis of the relevancy and accuracy of the article : The second paragraph will include your analysis of the relevancy and accuracy of the article as well as how you may apply what you learned to your own.

Specification of an economic model : Time Series Data - Data observed at equally spaced intervals, ordered in time. Specification of an economic model and Specify a statistical or econometric model

Consider two portfolios-what are the key rate durations : What are the key rate Durations for the one, two and three years of each portfolio, their effective duration.

What is relationship marketing and why is it important : Please provide an example of applying the concept of customer value to a personal or professional experience. What types of tools or strategies were used?

Macaulay duration-modified duration and convexity : 4-year 12% coupon bond has a yield of 10%. What are its Macaulay Duration, Modified duration and convexity.

Escrow for taxes and insurance : What will be Billy Bob's monthly payment for principal and interest, excluding the escrow for taxes and insurance?

Describe a time you had to adjust your work style : Describe a time you created or drafted documents or reports, and presented your findings orally and/or written.

User Account

All Pages