Reggie Portmus has made a performance evaluation of his bond holdings. He has misplaced some of the…

Reggie Portmus has made a performance evaluation of his bond holdings. He has misplaced some of the values and has asked for your help in calculating the remaining ones. At present, he holds 10- year AA, 5-year A, and 25-year B bonds, and the following information has been recovered:

I = external interest rate environment:

11

E = expected return:

10

U = unexpected return:

?

M = maturity:

0.2%/year in the first 5 years, 0.1%/year thereafter

S = spread/quality:

–0.2%/rank (AAA, AA, A, BBB, etc.)

B = specific selection:

0.25, 0.50, 0.75, respectively

C:

?

R:

?