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Analyzing a Bond Portfolio

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A porfolio consists of the following nine bonds:

1. Reynolds Amern
2. Donnelley RR
3. Altria Group
4. Alcoa Inc
5. Aetna Inc
6. KLA Tencor
7. Hospitality PRO
8. GE Capital
9. Sempra Energy

Part A:
1. For each of the bonds listed above, find the coupon rate, payment date, rating, years to maturity, yields to call, and yield to worst.
2. For each bond, find the current price(bid/ask), current yield, yield to maturity(bid/ask), and duration.
3. For each of the nine bonds, compute the annualized(historical) horizon return(holding period return) for the year of 2011.
4. For each bond, find/compute the close price and the yield to maturity at the point 12/31/2010.

Part B:
5. Compare the two yields to maturity(today and 12/31/2010) and the historical horizon return. Explain the relationship between the level of horizon return and the two yields.(Using these two yields to explain why the bond made or lost money more than expected.)
6. For the entire portfolio, compute the average maturity, coupon income, and duration.
7. Compute the month-to-month portfolio horizon return for the year 2011.
8. Find a proper benchmark and its historical return for the same time period. Decide if the portfolio of the nine bonds was outperforming the benchmark.
9. Use other benchmarks if necessary to identify the reasons for the relative portfolio performance.

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Solution Summary

The following posting helps with problems involving bond portfolios. Concepts discussed include coupon rates, yields, current prices and returns.

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