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Construct a bond portfolio

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A firm, with an obligation to pay $ 10 million in 7 years time, is seeking for a wealth manager to help them in securing it now. Construct a bond portfolio consisting of 3 bonds that would immunize the firm from interest rate risk in 7 years and maximize the convexity.

(Keep in mind that you are competing with other 9 wealth managers to propose your proposal !). If the market interest rate is 8%, how much will you invest in each bond of your choice? You can modify the template to fit your bond portfolio.

Reference no: EM133056568

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