Explain how to manage bond portfolios and what are the portfolio management strategies.

Assignment Questions

Q1: Why do most investors prefer to hold a diversified portfolio of securities as opposed to placing all of their wealth in a single asset?

Q2: Given the following financial data, compute:

Return on equity.

Quick ratio.

Long-term debt to equity.

Fixed-charge coverage.

Assets:  
Cash $ 2,500
Accounts receivable 3,000
Inventory 6,500
Fixed assets 8,000
Total assets $20,000
   
Liabilities and stockholders’ equity:  
Short-term debt $ 3,000
Long-term debt 2,000
Stockholders’ equity 15,000
Total liabilities and stockholders’ equity $20,000
   
Income before fixed charges and taxes $ 4,400
Interest payments 800
Lease payment 400
Taxes (35 percent tax rate) 1,120
Net income (after-taxes) $ 2,080

 

Q3: Explain the benefits derived from investing in deep discount bonds.

Q4: Explain how to manage bond portfolios and what are the portfolio management strategies.