Assume you manage a bond portfolio with a yield to maturity of 1.8% and duration of 5.1. Perform the below in the “Bond” tab provided in the attached excel file.
a. Calculate yield to maturity for each bond.
b. Calculate duration for each bond.
Answer the below in this word file.
c. Which bond will have the highest convexity.
d. What bonds, if any, would enhance the risk-return characteristics of your bond portfolio? Please list the reason(s) the bond(s) would have a favorable risk-return statistical profile.
e. You may have noticed that the benchmark interest rate has increased in recent weeks. What’s the impact of such an interest rate spike on bond portfolios?