Please assist with this assignment. It seems confusing.
FN480 Unit 4 Assignment
1. Go to the iShares website at www.ishares.com, and look up information about the following bond
Barclays 1-3 Year Credit Bond Fund (CSJ)
Barclays Intermediate Credit Bond Fund (CIU)
iShares 10+ Year Credit Bond Fund (CLY)
a. Complete the table below
CLY Average Yield to Maturity b. Determine which of these three funds would be best for each of the following investors. Explain
i. A very risk-averse investor
ii. An endowment fund expected to last in perpetuity
iii. An investor who tells you that they want as high a yield as possible consistent with an average
level of risk tolerance
c. Why must the yield to maturity be higher for funds with higher duration?
d. Compare the returns of the CSJ fund to the returns of the index that CSJ is based on. Why would
a difference exist? What is this difference called? 2. A fixed-income investor with a five-year time horizon has stated that he wants a guaranteed rate of
return regardless of any parallel shifts in market interest rates.
a. What is the name of the strategy that this investor should follow?
b. In constructing a portfolio for this investor, what is the most important variable to get right, and
what should the value of that variable be?
c. What will happen to the prices of the bonds in the portfolio if market interest rates rise? Given
this fact, what offsetting factor results in the guaranteed return? 3. An institutional investor has a $500,000 liability due at the end of each year for the next four years. It
would like to adopt a cash-matching strategy. The following bonds are available:
4-year maturity with coupon 6%
3-year maturity with coupon 5%
2-year maturity with coupon 4% 1-year maturity with coupon 3%.
a. In the first step of the cash-matching strategy, which bond is purchased, and for what principal
b. Which bond is purchased next? Will the principal amount need to be the same? Explain.
(Explaining the remaining steps of the process is not required, but I will give you feedback if you do.) 4. A manager has $100 million to invest, plus an additional $200 million that is borrowed at 2%. The
manager puts all $300 million into an investment with a 5% rate of return.
a. Find the return on the $100 million of the manager?s funds.
b. Find the return, less interest expense, on the $200 million that is borrowed.
c. Find the manager?s total rate of return (in percent).
d. This manager has used borrowing to amplify returns. What is the name of this strategy? 5. Five types of derivatives are listed here:
binary credit option
credit default swap
currency forward contract
interest rate futures contract
interest rate swap
Which type of derivative should be used in the following situations? Use each derivative type once
and only once. Explain your answers.
a. A company wishes to convert its adjustable-rate liability into a fixed-rate liability.
b. An investor is certain that company XYZ?s bonds will be downgraded.
c. An investor owns a foreign bond and is concerned about changes in the exchange rate.
d. An investor owns bonds in company LMN, and wants to shift the risk of a credit event to a
e. An investor thinks that market interest rates in general will fall. 6. Suppose that you are advising a client about alternative investments. For each of the investment
types, give: A short explanation of what the investment is. At least two unique benefits or advantages of the investment OTHER THAN the fact that it will
provide diversification, or that it has low or negative correlation to other investments (which is
the same thing as providing diversification). At least two unique disadvantages or risks of the investment. At least two specific ways that the investment could be added to a portfolio. For example, one
way to add commodities to a portfolio is by purchasing shares of the iShares Gold Trust (ticker
symbol IAU). Do not copy this example for your own answer. a. Real estate explanation: benefits/advantages: disadvantages/risks: specific ways to add to a portfolio: b. Commodities explanation: benefits/advantages: disadvantages/risks: specific ways to add to a portfolio: c. Managed futures explanation: benefits/advantages: disadvantages/risks: specific ways to add to a portfolio:
This question was answered on: Sep 13, 2020Buy this answer for only: $15
This attachment is locked
Pay using PayPal (No PayPal account Required) or your credit card . All your purchases are securely protected by .
About this QuestionSTATUS
Sep 13, 2020EXPERT
GET INSTANT HELP/h4>
We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.
You can also use these solutions:
- As a reference for in-depth understanding of the subject.
- As a source of ideas / reasoning for your own research (if properly referenced)
- For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
NEW ASSIGNMENT HELP?
Order New Solution. Quick Turnaround
Click on the button below in order to Order for a New, Original and High-Quality Essay Solutions. New orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.
WE GUARANTEE, THAT YOUR PAPER WILL BE WRITTEN FROM SCRATCH AND WITHIN A DEADLINE.