ASSIGNMENT QUESTION:
MR. Hassan is a well-educated person who works in a private company as an
accountant. Last week he inherited 1 million rupees from his aunt’s property. He
is basically a risk averse investor. Stock market is much riskier than bond market.
So he wants to select a bond for investment. For this purpose, as a part of bond
analysis, he calculated the duration of bonds. He has two bonds as investment
options.
a) The par value of Bond A is Rs.100, coupon rate is 10%, maturity period is
10 years and yield is 12%.
b) Bond B is 3-years zero coupon bond. Its face value is Rs.100 and currently
it can be purchased at Rs.75.
You are required to find out the
(I) Macaulay duration and Modified duration in both cases.
(II) Also explain what modified duration shows in both cases and
which bond has more price volatility risk?
SPRING 2013
INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT (FIN630)
ASSIGNMENT NO. 2
DUE DATE: 8TH JULY, 2013
MARKS: 20 MARKING KEY:
Macaulay duration calculation for Investment in bond “A” & Bond “B”
Marks = 13
Modified Bond duration calculation for Investment decision in bond “A” & Bond
“B”
Marks = 4
Interpretation for Investment in bond “A” & Bond “B”
Marks = 3
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MR. Hassan is a well-educated person who works in a private company as an
accountant. Last week he inherited 1 million rupees from his aunt’s property. He
is basically a risk averse investor. Stock market is much riskier than bond market.
So he wants to select a bond for investment. For this purpose, as a part of bond
analysis, he calculated the duration of bonds. He has two bonds as investment
options.
a) The par value of Bond A is Rs.100, coupon rate is 10%, maturity period is
10 years and yield is 12%.
b) Bond B is 3-years zero coupon bond. Its face value is Rs.100 and currently
it can be purchased at Rs.75.
You are required to find out the
(I) Macaulay duration and Modified duration in both cases.
(II) Also explain what modified duration shows in both cases and
which bond has more price volatility risk?
SPRING 2013
INVESTMENT ANALYSIS AND PORTFOLIO MANAGEMENT (FIN630)
ASSIGNMENT NO. 2
DUE DATE: 8TH JULY, 2013
MARKS: 20 MARKING KEY:
Macaulay duration calculation for Investment in bond “A” & Bond “B”
Marks = 13
Modified Bond duration calculation for Investment decision in bond “A” & Bond
“B”
Marks = 4
Interpretation for Investment in bond “A” & Bond “B”
Marks = 3
PTCL PRODUCTS
Broadband
Be Broadband - Be Pakistani
Ramadan Promotion
Broadband Economy Package
Broadband Static IP
PTCL One Million Milestone Celebrations
FREE Broadband Wi-Fi Modem
SMS Complaint Service
Broadband Student Basic Package
PTCL VideoCon
Broadband 50MB VDSL
Broadband Pakistan (DSL)
EVO 3G Wireless Broadband
EVO Happy Week
Reconnect Your EVO Today
PTCL EVO 3G - Your world now in your hands
EVO New Cloud on the horizon
EVO Discount Offer - Stay Connected-Get Rewarded
EVO & Nitro 3G Wi-Fi Cloud
Smart TV Application for EVO Wireless Broadband
EVO Recharge Offer
FREE EVO & Nitro Cloud
EVO 3G Packages
3G EVO Wi-Fi Hotspot
U-Load Service
EVO Widest Wireless Coverage
EVO Easy Paisa Recharge
EVO 3G Coverage Area
EVO 256kbps Packages
EVO Landline Recharge Service
Public Cash Payment Machine
EVO Wi-Fi CLOUD
EVO 3G Nitro 9.3
EVO 3G 3.1
Smart TV
Ramadan Promotion
MyTV.com.pk
Smart TV PC Application
Download Smart TV PC App for DSL Broadband (UPGRADE)
Tutorial for SMART TV New Electronic Page Guide (EPG)
Smart TV Application for EVO Wireless Broadband
Smart TV Standalone
Smart TV FAQs
Smart TV website
Smart TV bundled offer
Public Cash Payment Machine
Smart TV
EVO Wingle 9.3Mbps
EVO Happy Week
EVO Wingle Software Upgrade/Patch
EVO Discount Offer - Stay Connected-Get Rewarded
Smart TV Application for EVO Wireless Broadband
EVo Wingle 9.3 Mbps
EVO Wingle Packages
EVO Wingle Recharge Mechanisms
EVO Wingle FAQs
Landline
Ramadan Promotion
PTCL Designer Telephone Sets
Lowest International Call Rates
PTCL Islamic Services
Come on People - RECONNECT LANDLINE
Freedom Unlimited Package
PTCL VideoCon
PTCL Cricket Info Service (1216)
International Packages
Mobile Bucket Package
PTCL Double Up Unlimited Package
SMS Complaint Service
5 Reason to have Landline
Super Sunday Offer
Public Cash Payment Machine
Value Added Services
PTCL Landline
Call Tariff - International / Domestic
Print & View Duplicate Bill
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