day is 1 July, 2019. Siobhán has a portfolio which onsists of two different types of financial instruments enceforth referred to as instrument A and instrument . Siobhán purchased all instruments on 1 July 2010
day is 1 July, 2019. Siobhán has a portfolio which onsists of two different types of financial instruments enceforth referred to as instrument A and instrument . Siobhán purchased all instruments on 1 July 2010
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:Today is 1 July, 2019. Siobhán has a portfolio which
consists of two different types of financial instruments
(henceforth referred to as instrument A and instrument
B). Siobhán purchased all instruments on 1 July 2010
to create this portfolio, which is composed of 23 units
of instrument A and 20 units of instrument B.
• Instrument A is a zero-coupon bond with a face
value of $100. This bond matures at par. Its maturity
date is 1 January 2029.
• Instrument B is a Treasury bond with a coupon rate
of j2=3.01% p.a. and a face value of $100. This bond
matures at par. Its maturity date is 1 January 2022.
Calculate the current duration of Siobhán's portfolio
using a yield to maturity of j₂=3.07% p.a. Express your
answer in terms of years and round your answer to two
decimal places.
O a. 6.66 years
O b. 5.70 years
O c. 5.44 years
O d. 7.23 years
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