You have a portfolio totalling RM219,000 and want to invest in municipal bonds, blue-chips stocks or speculative stocks. The municipal bonds pays pay 6% annually. Over a five-year period, you expect blue-chips stock to return 10% annually and growth stocks to return 15% annually. You want a combined annual return of 8% and you also want to have only one- fourth of the portfolio invested in stocks. How much should be allocated to each type of investment?
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- You know the following about your client’s fixed income portfolio. The portfolio is worth $1,600,000. Currently, the portfolio has $700,000 invested in 3-year 5.5% coupon bonds, each with a face value of $1000, with annual coupons, and $900,000 invested in a long-term bond fund which has a duration of 12.4 years. The yield curve is currently flat at 4.5% per year. What is the duration of your client’s portfolio? Group of answer choices 8.22 years 7.14 years 7.75 years 10.91 years 6.03 years1. At 35 years old, you have an investment portfolio of $150,000. You are looking into adjusting the allocation of your investments for both your existing portfolio and your future contributions. It is currently at an 80/20 allocation, but now you want to adjust to a 70/30 allocation. You believe that 8% is what stocks will return over the next fifteen years, and 4% is what you expect to return in your bond portfolio. If you invest $700/month for the next fifteen years, what will your portfolio be worth? (assume monthly compounding) $598,652 $632,840 $724,248 $666,051 2. PowerTech Company has issued bonds paying a 4% Coupon Rate. The current market price of the bonds are $920. What is the Current Yield of the bond? 4% 4.9% 3.57% 4.3% 3. You are looking to buy a car that costs $25,000. Your bank has told you that they will give a five year loan with an APR of 8% that…You manage a pension fund that will provide retired workers with lifetime annuities. You determine that the payouts of the fund are essentially going to resemble level perpetuities of $2.24 million per year. The yield to maturity on all bonds is 14%. (a). Assume the duration of six-year maturity bonds with coupon rates of 10% (paid annually) is 5 years, and the duration of 22-year maturity bonds with coupon rates of 7% (paid annually) is 11 years. Calculate how much of each of these two coupon bonds (in market value) you will want to hold in order to both fully fund and immunize your obligation. (b). Calculate the total par value of your holdings in the six-year maturity coupon bond. Please show working
- 3. A company has a liability of $50,000 due in 5 years. The cost of capital is 3 percent per year. What amount of money do you need to set aside at the beginning of each month for the next 5 years to meet this liability? Broadway Financial Managers are investment brokers and manage a wide range of portfolios. The Bushel Portfolio is one of Broadway's best long-term performer with an average rate of return of 6%. Suppose a client invests $200,000 in the Bushel Portfolio, what would the investment amount be in 1, 2, 5 & 10 years? 4.You currently have $300,000. You want to invest it in the following three assets: 10-year US Treasury bond with coupon rate 3.8%, Blandy and Gourmange stocks attached: Your goal is to have the expected return of 6.8% with a minimum portfolio risk. How much money should you allocate to these three assets?One year ago you bought a $10,000, 4-year Government of Canada Treasury Bill (discount bond) at the then market yield of 5%. Today the market yield on the bond is 3% and now you find that must sell the bill. (a ) What is the current market price of the bill? (b ) What is your one period holding period return on your investment?
- After careful consideration, you decide that you want to diversify your portfolio and invest in the bonds of HCA Healthcare. The bonds pay interest annually, will mature in 25 years, and have a coupon rate of 4% on a face value of $1,000. Currently, the bonds are selling for $910. If you are looking for a required return of 7% for this bond, what is the highest price you would be willing to pay?What is the current yield of these bonds?What is the yield to maturity on these bonds if you purchase them at the current price? (Use the Rate function) If you hold the bonds for two years, and interest rates do not change, what total rate of return will you earn, assuming that you pay the market price? If the bonds can be called in 4 years with a call premium of 6% of the face value, what is the yield to call?A stock sells for a price of $60. Next year's dividend will be $3 per share. If the ROE ("project return") on reinvested funds is 10% and the company has a payout ratio of 40%, what must be the market rate (r)?You are considering investing in a zero- coupon bond that sells for P250. At maturity in 16 years it will be redeemed for P1,000. What approximate annual rate of growth does this represent? Format of answer: If answer is 10%, write here 10%.
- You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 5%.a. How much of (i) the zero-coupon bond and (ii) the perpetuity will you hold in your portfolio?b. How will these fractions change next year if target duration is now nine years?You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 10.0%. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) b. How will these weights change next year if target duration is now nine years? (Round your answers to 2 decimal places.)Malenia is looking to purchase a 10-year, $10,000 face value zero coupon bond. Assuming the current cost of debt is 7.00% per year. How much would the price change if the cost of debt rose to 9.00% per year?