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Part a You are the portfolio manager of a large company that invests in many...

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Finance

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Part a You are the portfolio manager of a large company that invests in many securities including corporate bonds. You have been assigned the task of bond portfolio management. You are provided with the following data in relation to bonds: Maturity period 13 years Coupon rate 13% Par value $1,000 Coupons on bonds are paid annually Yield to maturity of bonds 9% Required: i) Fill in the blanks in the following table Year (t) Cash flow (CF) CF/(1+y) Wt t*W t+t^2(t+t^2)*CF/(1+y) 1 2 3 4 2 5 6 7 8 9 10 11 12 13 See the lecture notes for formulae ii) iii) Based on the calculations in part i, calculate modified duration and convexity of the bond Using the modified duration, calculate the change in bond price in dollars when yield to maturity changes by one percent Using the convexity, calculate the change in bond price in dollars when yield to maturity changes by one percent iv)

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