Discussing a strategy for immunizing a portfolio

Assignment Help Business Management
Reference no: EM131786931

Three portfolio managers are discussing a strategy for immunizing a portfolio so as to achieve a target yield. Manager A, whose portfolio consists of Treasury securities and option-free corporates, stated that the duration of the portfolio should be constructed so that the Macaulay duration of the portfolio is equal to the number of years until the liability must be paid. Manager B, with the same types of securities in his portfolio as Manager A, feels that Manager A is wrong because the portfolio should be constructed so that the modified duration of the portfolio is equal to the modified duration of the liabilities. Manager C believes Manager B is correct. However, unlike the portfolios of Managers A and B, Manager C invests in mortgage-backed securities and callable corporate bonds. Discuss the position taken by each manager and explain why they are correct.

Reference no: EM131786931

Questions Cloud

Underlying principle in an immunization strategy : a. What is the basic underlying principle in an immunization strategy?
What is the standard deviation of portfolio : A pension fund manager is considering three mutual funds. The first is a stock fund, the second is a long-term government and corporate bond fund.
Bond immunization strategy : What are the risks associated with a bond immunization strategy?
Describe the shape of the distribution : Siblings The histogram shows the distribution of the numbers of siblings (brothers and sisters) for 2000 adults surveyed in the 2012 General Social Survey.
Discussing a strategy for immunizing a portfolio : Three portfolio managers are discussing a strategy for immunizing a portfolio so as to achieve a target yield.
Identify the appropriated general transaction-related audit : Required: For each specific transaction-related audit objective, identify the appropriated general transaction-related audit objective
Cash flow matching strategy : Why is there greater risk in a multiperiod immunization strategy than a cash flow- matching strategy?
What is a contingent immunization strategy : a. What is a contingent immunization strategy? b. What is the safety net cushion in a contingent immunization strategy?
How many clients are serviced : How many clients are serviced? Identify TEN specific risks - these should be either risks you identified as facility manager, or those that you recognize.

Reviews

Write a Review

Business Management Questions & Answers

  Percent return on investments

Rudd like to earn at least 5 percent return on her investments. What should she do?

  Left-handed and a democrat

What is the probability that a randomly chosen U.S. president is left-handed and a democrat?

  Provide a business profile of an existing company

Provide a business profile of an existing company that you have selected. Identify the main functions that this company provides and analyze internal workflows to identify areas.

  What is co-location

What is co-location, and why is it used? Marissa Mayer, CEO of Yahoo, sparked a national debate when she insisted that all her employees be physically present for work. Debate the merits of co-location, including its advantages and disadvantages.

  Conscientious delaware directors

Briefly explain why reasonably conscientious Delaware directors should not be too concerned about liability for violation of the monitoring duty established in Caremark.

  How corporate policies can be used to improve the general

How corporate policies can be used to improve the general outcomes of a financial organization.

  Examples of disastrous public relations

Leaders face many hurdles when leading in multiple countries. There are several examples of disastrous public relations fallout that have occurred when companies have outsourced work to other nations. When determining where to move offshore as a c..

  What is the break-even volume

How much profit would be made off of 1500 boxes of toilet paper? What is the break-even volume.

  Substitution and income effects for leisure

Jasmine can work as much as 64 hours per week. She receives $200 per week in non-wage income. Her utility function for leisure and consumption is U(R,C)=320R^(1/2)+2C, where R is hours of leisure and C is consumption. The price of consumption is ..

  Examine three of the ethical challenges that zappos faces

Examine three of the ethical challenges that Zappos faces. Recommend three actions that Zappos' leadership should take in order to address these ethical challenges.

  Government imposes a price ceiling

Let's say that the government imposes a price ceiling of $1.50/gallon on gas. This will likely create a shortage.

  Risk management at wal-mart

Risk Management at Wal-Mart - Prepare a report that demonstrates the principles, concepts, types, frameworks and processes of Risk Management

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd