No.PZ2018120201000012
来源: 原版书
Chaopraya is an investment advisor for high-net-worth individuals. One of her clients, Schuylkill, plans to fund her grandson’s college education and considers two options:
- Option 1 Contribute a lump sum of $300,000 in 10 years.
- Option 2 Contribute four level annual payments of $76,500 starting in 10 years.
The grandson will start college in 10 years. Schuylkill seeks to immunize the contribution today.
For Option 1, Chaopraya calculates the present value of the $300,000 as $234,535. To immunize the future single outfow, Chaopraya considers three bond portfolios given that no zero- coupon government bonds are available.
The three portfolios consist of non-callable, fixed-rate, coupon-bearing government bonds considered free of default risk. Chaopraya prepares a comparative analysis of the three portfolios, presented in Exhibit 1.
Chaopraya evaluates the three bond portfolios and selects one to recommend to Schuylkill.
No.PZ201812020100001201
来源: 原版书
Recommend the portfolio in Exhibit 1 that would best achieve the immunization. Justify your response.
我的回答如下，麻烦老师批改：
I recommend the portfolio A that would best achieve the immunization, because it meets the needs of single obligation immunization：
- Portfolio's market value of $235727 is larger than the PV of liability of $234535.
- The duration of portfolio A of 9.998 is almost equal to the duration of liability of 10.
我没有写convexity要尽量小，也没有比较其他两个portfolio，会扣分吗？谢谢
