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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