Portfolio Management
Please type and submit hard and soft copy.
1. Use the information below to solve the coming problems from a to e
On March 1, an all equity portfolio you managed is equally weighted. On June 1, it has changed as shown in the following Table.
|
Stock
|
Value on March 1
|
Beta
|
Value on June 1
|
|
1000 A
|
$10000
|
1.07
|
$11750
|
|
500 B
|
10000
|
0.92
|
9500
|
|
2300 C
|
10000
|
1.10
|
12000
|
|
1200 D
|
10000
|
1.22
|
17875
|
|
500 E
|
10000
|
1.10
|
8875
|
|
1700 F
|
10000
|
0.88
|
10625
|
|
900 G
|
10000
|
1.00
|
12455
|
|
1200 H
|
10000
|
1.03
|
13800
|
|
2500 I
|
10000
|
1.22
|
9500
|
|
1500 J
|
10000
|
1.14
|
11000
|
|
Total
|
100000
|
|
117380
|
a. What specific tips should you take to rebalance the portfolio, assuming no security position is completely eliminated?
B. What is the Beta for the portfolio?
c. What (specifically) would you do to bring this portfolio back to a target beta of 1.10?
d. Consider the portfolio before any adjustments; estimate the value of each of the components if the General Index rises from 1,400,000 to 1,500,000
e. Suppose the variance of the market is 0.04. What is the approximate variance of the original portfolio?
2.
Bond 1 is a 5-yr, 100 par zero, price =$62.09
Bond 2 is a 10-yr, 100 par zero, price=$38.55
The total value of the portfolio is 100.64
What is the portfolio duration?
If the interest rate expected to go down by 0.2% how much is the effect on the portfolio value?
3.
Assume you have a liability of $3862 after 10 years the current interest rate is 10% and the term structure is flat
How can you immunize your liability?
Will investing in a bond with 1000 semiannual coupon of 100 and maturity of 20 will do the job? If market interest is 4% 10%, 12%.