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A portfolio manager would like to replicate the dollar duration of a portfolio composed of $20 million par value of 5-year bonds, by using a combination of 10 year bonds and cash. The following information pertains to the bonds under consideration: Bond 1 2 Coupon (%) 5% 6% Maturity (y) 5 10 Price ($ per 100) 101.27 106.39 Duration 4.14 8.55 What is the par value of the 10 year bonds that must be acquired for the cash+bond portfolio, in order to match the dollar duration of the original portfolio?

A portfolio manager would like to replicate the dollar duration of a portfolio composed of $20 million par value of 5-year bonds, by using a combination of 10 year bonds and cash. The following information pertains to the bonds under consideration: Bond 1 2 Coupon (%) 5% 6% Maturity (y) 5 10 Price ($ per 100) 101.27 106.39 Duration 4.14 8.55 What is the par value of the 10 year bonds that must be acquired for the cash+bond portfolio, in order to match the dollar duration of the original portfolio?

Essentials Of Investments
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
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A portfolio manager would like to replicate the dollar duration of a portfolio composed of $20 million par value of 5-year bonds, by using a combination of 10 year bonds and cash. The following information pertains to the bonds under consideration: Bond 1 2 Coupon (%) 5% 6% Maturity (y) 5 10 Price ($ per 100) Duration 101.27 4.14 106.39 8.55 What is the par value of the 10 year bonds that must be acquired for the cash+bond portfolio, in order to match the dollar duration of the original portfolio?
Transcribed Image Text:A portfolio manager would like to replicate the dollar duration of a portfolio composed of $20 million par value of 5-year bonds, by using a combination of 10 year bonds and cash. The following information pertains to the bonds under consideration: Bond 1 2 Coupon (%) 5% 6% Maturity (y) 5 10 Price ($ per 100) Duration 101.27 4.14 106.39 8.55 What is the par value of the 10 year bonds that must be acquired for the cash+bond portfolio, in order to match the dollar duration of the original portfolio?
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