If the current interest rate is 5% and your semi-annual coupon paying bond has a duration of 5.33 years, how much will the price
1 answer:
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Answer:
6.05 years
Explanation:
Payback period is the time in which a project returns back the initial investment in the form of net cash flow. For this purpose we use the net cash flows to calculate the payback.
Payback working is attached with this answer please find it.
Answer:
Part a: The portfolio which maximizes the expected return is in the attached file.
Part b:The portfolio's expected rate of return is 11.20% and the weight is 100% for US only.
Explanation:
As the question is incomplete and the data is not available, thus the complete question is found as attached with the solution.
The Sharpe rate is given as
Where
- E_a is the estimated rate of return for a value
- E_r is the risk free rate of return
- σ is the standard deviation of the investment.
The portfolio variance is given as
Where
- σ is the standard deviation of the investment.
- w is the weighted value of the investment
- cv is the covariance term
Portfolio standard deviation is given as
Expected rate is given as
Now the Sharp value is calculated as above.
Now the values as given in the excel sheet are added in the attached excel sheet, following formulas are used to calculate various values
Sharpe ratio is calculated using =(B6-J3)/C6
Portfolio variance is calculated using (=B13^2*C6^2+B14^2*C7^2+B15^2*C8^2+B16^2*C9^2+2*B13*B14*C6*C7*D7+2*B13*B15*C6*C8*D8+2*B13*B16*C6*C9*D9+2*B14*B15*C7*C8*E8+2*B14*B16*C7*C9*E9+2*B15*B16*C8*C9*F9)
Portfolio standard deviation is SQRT(Variance)
Expected return is calculated using =B13*B6+B14*B7+B15*B8+B16*B9
Sharpe is calculated using =(B23-$J$3)/B22
Part a:
The portfolio which maximizes the expected return is in the attached file.
Part b:
The portfolio's expected rate of return is 11.20% and the weight is 100% for US only.
