Fixed Income Question
As part of my into to fixed income class we were assigned a project to construct fixed income portfolios for investors in different scenarios. I'm can't seem to figure out the last one which is for a charitable foundation. If anyone has any suggestions I would greatly appreciate it. Below is the question:
Directions: Construct a fixed income portfolio for each of these investors which will meet each investor's stated needs, selecting the securities from the attached list of actual bonds available in the marketplace currently. Explain the rationale for your choices and show how the portfolio meets the investor's needs.
Investor D: Is a charitable foundation which supports several programs at a funding level totaling $10,000,000 annually. The foundation has an investment portfolio totaling $200,000,000 which is invested equally in stocks (which yield 3%) and bonds; that asset allocation cannot be changed. The foundation must make grants of at least 5% of its assets annually or it will incur a very high tax; should the investment income be insufficient to enable it to make sufficient grants to avoid the tax, the foundation trustees have resolved to make the necessary grants from investment principal.
The bonds to choose from are as follows
Bloomberg Cusip:
34529RAD3
42805RBF5
17305EER2
254683AR6
78446JAA4
31417Y6B8
31418UC28
3138A8YD2
36202FXC5
36202FSA5
3135G0BR3
3137EACW7
3133XMQ87
3135G0DF7
3134A4KX1
912810QS0
912828RC6
912828RH5
912828RJ1
912795Y62
655844AZ1
20825CAQ7
05531FAA1
00206RAX0
912656AG0
88033GBJ8
247367AX3
29364GAF0
438516AP1
61748AAE6
I was having trouble building a portfolio that doesnt require the foundation to dip into the principal. Any suggestions are greatly appreciated
-Thanks in advance
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