Please only answer question #1 - Thank you! CouponMaturity YTM Modified DVoi Ful
ID: 2782165 • Letter: P
Question
Please only answer question #1 - Thank you!
CouponMaturity YTM Modified DVoi Full Price S&P; ier ar Amount(000) million % | Duration Credit Rate ear 6.56 Treasu Treas Treasu Treasurv Sector Time Warner8.18 50,109.87 54,121.57 203,838.95 172,095.69 76,387 98,762 87,192 262,341 7.77 8/15/07 4.72 44,231.12 93,710 ise Texas Utilities 6.375 Rockwell International Transamerica 9.375 Corporation 1/1/08 15,523.06 26,735.52 30,678 1/15/08 3/1/08 6 1/08 6.04 52,837 A 4.93 15 17,445 30,153 39,949 8,600.38 6.76 5.25 15,830.32 oas Corporation United Airlines6.831 Burlington Northern Santa 22,011.89 1,817.04 7.34 9/24/08 News America 7.375 Holdin Litton Industries America Standard Inc Caterpillar Inc. 9.375 Corporate Sector Portfolio 10/17/086.56 5.3.4 10/15/09 6.70 5.81 7.59 6.10 6.79 17,243.92 38,830.55 25,212.52 32,292 66,834 41,332 7.625 2/15/10 5.39 235,137.67 436,248 5.83 402,030.38 698,589 1·Calculate portolio yield composed of the entire bond in Texas utilities, Transamerica, United airline, and Litton Industry Assume the four bonds respectively have maturity of 4, 5, 6 and 7 years .To calculate portfolio yield you need to estimate price of each bond assuming respective yield, coupon in the exhibit with the maturity that is given. Use the total market value as an input in excel. Use the cashflows from the entire bond portfolio for 7 period as your input into IRR. 2. Calulate the terminal value of the above portfolio assuming the proceeds from the portolio is invested at 3, 4. and 4.5 percent.Explanation / Answer
The portfolio yield can be computed by way of the following formula-
Portfolio Yield=Total Interest & Dividend Income/Avg. Gross O/S Portfolio
The average gross o/s portfolio which denotes the PV of the portfolio can be computed as follows-
This is computed taking YTM, interest payments, redemption tenure etc. into consideration.
Using the above PV, portfolio yield can be computed-
Computation of PV of the portfolio Interest Income Face Value Price of the Bond No. of years of redemption YTM Texas Utilites 4271250 6.38% 30000000 30196654.73 4 6.19 Transamerica 1406250 9.38% 15000000 16903200.82 5 6.34 United Airline 2595780 6.83% 38000000 39570103.2 6 5.99 Litton Industry 4800000 8% 60000000 51398376.97 7 6.7