Illustrate the situation graphically

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You manage a portfolio for Ms. Angel Foodcake, who has instructed you to be sure her portfolio has a value of at least $350,000 at the end of six years. The current value of Ms. Foodcake's portfolio is $250,000. You can invest the money at a current interest rate of 8%. You have decided to use a contingent immunisation strategy.

• What amount would need to be invested today to achieve the goal, given the current interest rate?

• Suppose that four years have passed and the interest rate is 9%. What is the trigger point for Angel's portfolio at this time? (That is, how low can the value of the portfolio be before you will be forced to immunise to be assured of achieving the minimum acceptable return?)

• Illustrate the situation graphically.

• If the portfolio's value after 4 years is $291,437 what should you do?

Reference no: EM13767072

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