Determine the cushion spread

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Question - Murehwa Securities case scenario Rodrick Mashanda, CFA is a Fixed income securities trader at Murehwa Securities. Mashanda has decided to pursue a contingent immunization strategy over a 3-year time horizon. He just purchased at par R10 million worth of 7%, semiannual coupon, 5 year bonds. The current rate of return for immunized strategies is 7%, and he is willing to accept a return of 8%.

Required -

i) Determine the cushion spread.

ii) Compute the required terminal value and the required assets needed at initial implementation.

iii) Determine whether active management is still viable should interest rates immediately fall to 6.5%.

Reference no: EM132642848

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