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
Related questions
Question
![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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3b2fc5b2-0ab8-4120-8c16-8885c43a1c5a%2Fb364b836-f3e9-40a9-8f57-5fbed516375c%2Fn58uxq_processed.jpeg&w=3840&q=75)
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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