Assignement B Abacus Ltd is an investment fund that specializes in fixed income securities. At the end of 2010 the fund’s bond portfolio has the following information BOND YIELD TO MATURITY PRICE DURATION CONVEXITY A 12% 1045 2.35 16.46 B 14% 2265 4.26 22.80 C 8% 1430 3.45 11.96 D 10% 1100 4.20 15.56 Assume that the yield to maturity on each bond increases by 4%, calculate (i) The percentage by which the price of each bond will decrease (ii) The amount in cedis by which the price of each bond will decrease (iii) The percentage and the cedi decrease in the total value of the portfolio.
Assignement B Abacus Ltd is an investment fund that specializes in fixed income securities. At the end of 2010 the fund’s bond portfolio has the following information BOND YIELD TO MATURITY PRICE DURATION CONVEXITY A 12% 1045 2.35 16.46 B 14% 2265 4.26 22.80 C 8% 1430 3.45 11.96 D 10% 1100 4.20 15.56 Assume that the yield to maturity on each bond increases by 4%, calculate (i) The percentage by which the price of each bond will decrease (ii) The amount in cedis by which the price of each bond will decrease (iii) The percentage and the cedi decrease in the total value of the portfolio.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Assignement B
Abacus Ltd is an investment fund that specializes in fixed income securities. At the end of
2010 the fund’s bond portfolio has the following information
| BOND | YIELD TO MATURITY | PRICE | DURATION | CONVEXITY |
| A | 12% | 1045 | 2.35 | 16.46 |
| B | 14% | 2265 | 4.26 | 22.80 |
| C | 8% | 1430 | 3.45 | 11.96 |
| D | 10% | 1100 | 4.20 | 15.56 |
Assume that the yield to maturity on each bond increases by 4%, calculate
(i) The percentage by which the price of each bond will decrease
(ii) The amount in cedis by which the price of each bond will decrease
(iii) The percentage and the cedi decrease in the total value of the portfolio.
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