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- An investor has $826,000 to invest in bonds. Bond A yields an average of 5% and the bond B yields 6%. The investor requires that at least 3 times as much money be invested in bond A as in bond B. You must invest in these bonds to maximize his return. This can be set up as a linear programming problem. Introduce the decision variables: x = dollars invested in bond A y = dollars invested in bond B Compute x + y. $. Round to the nearest cent.A financial advisor suggests you select one of two types of bond investments in which to invest $10,000. Bond X pays a return of 6% and has a default rate of 3%. Bond Y pays a return of 4% and has a default rate of 2%. Find the expected return and decide which bond would be a better investment. When the bound defaults, the investor losses all the investmentInvestment Investors must make decisions about how much money to invest in various products. Their tolerance for risk as well as the return rates and minimum investment requirements comes into play in this decision making process. Oftentimes, the situation can be described as a linear programming problem, where the objective function is the return on investment. Answer the questions below to help the investor. Investor Matt has $727,000 to invest in bonds. Bond A yields an average of 8.6% and the bond B yields 8%. Matt requires that at least 4 times as much money be invested in bond A as in bond B. You must invest in these bonds to maximize his return. What is the maximum return? per year. Round to the nearest cent.
- K An investment firm recommends that a client invest in bonds rated AAA, A, and B. The average yield on AAA bonds is 4%, on A bonds 5%, and on B bonds 8%. The client wants to invest twice as much in AAA bonds as in B bonds. How much should be invested in each type of bond if the total investment is $19,000, and the investor wants an annual return of $990 on the three investments? The client should invest $ in AAA bonds, $ in A bonds, and $ in B bonds.An investor has $633,000 to invest in bonds. Bond A yields an average of 8% and the bond B yields 5%. The investor requires that at least 3 times as much money be invested in bond A as in bond B. You must invest in these bonds to maximize his return. This can be set up as a linear programming problem. Introduce the decision variables: ?=dollars invested in bond A ?=dollars invested in bond B Compute ?+? $ ________. Round to the nearest cent.An investment firm recommends that a client invest in bonds rated AAA, A, and B. The average yield on AAA bonds is 4%, on A bonds 6%, and on B bonds 11%. The client wants to invest twice as much in AAA bonds as in B bonds. How much should be invested in each type of bond if the total investment is $28,000, and the investor wants an annual return of $1,740 on the three investments? Question content area bottom Part 1 The client should invest $enter your response here in AAA bonds, $enter your response here in A bonds, and $enter your response here in B bonds
- 1) a. You approach your broker to borrow money against securities held in your portfolio. Eventhough the loan will be secured by the securities in your portfolio, the broker's rate for lending tocustomers is 5 percent. Assuming a risk-free rate of 4 percent and an expected market return of 11percent with a standard deviation of 15 percent, draw the capital market line related to yourinvestment opportunities. b. Estimate your expected return and risk if you invest 20 percent of your portfolio in the risk-freeasset. What if you decide to borrow 20 percent of your initial wealth and invest the money in themarket?If your primary goal is current yield, which one of these bonds is the wiser investment? Bond A: $1,000 corporate bond that pays 6 percent and has a current market value of $700; or Bond B: $1,000 corporate bond that pays 7.25 percent and has a current market value of $800?An investor is presented with the following two alternative investment strategies: purchase a 3-year bond with an interest rate of 6% and hold it until maturity or, purchase a 1-year bond with an interest rate of 7%, and when it matures, purchase another 1-year bond with an expected interest rate of 6%, and when it matures, purchase another 1-year bond with an interest rate of 5%. What is the expected return of the first strategy? What is the expected average return over the 3-years for the second strategy? Why does our anayses of the expectations theory indicate that this is exactly what you should expect to find?
- Consider a risk-neutral investor which is faced with the following two investments for their $1,000: - a riskless (or risk-free) bond paying a interest rate i=3% - A risky bond, which may pay back with probability 90%, and not pay with probability 10% What is the risk premium x that the risky bond should pay?Working as an investment analyst for a fund that invests in fixed-income assets, you are tasked with evaluating the efficacy of a potential investment. You are given a bond that has a 5% coupon rate and matures in 5 years. Assume comparable debt yields 7% and that the bond is sold in increments of $1,000. What is the value of one increment of the bond?After recently receiving a bonus, you have decided to add some bonds to your investment portfolio. You have narrowed your choice down to the following bonds (assume semiannual payments): a. Using the PRICE function, calculate the intrinsic value of each bond. Is either bond currently undervalued? How much accrued interest would you have to pay for each bond? b. Using the YIELD function, calculate the yield to maturity of each bond using the current market prices. c. Calculate the duration and modified duration of each bond.d. Which bond would you rather own if you expect market rates to fall by 2% across the maturity spectrum? What if rates will rise by 2%? Why?