5. To create a portfolio with a duration of 4 years, using a 5-year zero-coupon bond and a 3 year 8% annual coupon bond with a yield to maturity of 10%, one would have to invest % of the portfolio value in the zero-coupon bond. (Hint: First find duration of the coupon bond and use the fact that the duration of a bond portfolio is equal to the sum of duration of each bond x each bond's portfolio weight) A) 50 B) 55 C) 60 D) 65
5. To create a portfolio with a duration of 4 years, using a 5-year zero-coupon bond and a 3 year 8% annual coupon bond with a yield to maturity of 10%, one would have to invest % of the portfolio value in the zero-coupon bond. (Hint: First find duration of the coupon bond and use the fact that the duration of a bond portfolio is equal to the sum of duration of each bond x each bond's portfolio weight) A) 50 B) 55 C) 60 D) 65
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:5. To create a portfolio with a duration of 4 years, using a 5-year zero-coupon bond and a 3
year 8% annual coupon bond with a yield to maturity of 10%, one would have to invest
% of the portfolio value in the zero-coupon bond. (Hint: First find duration of
the coupon bond and use the fact that the duration of a bond portfolio is equal to the sum
of duration of each bond x each bond's portfolio weight)
A) 50
B) 55
C) 60
D) 65
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