[MULTIPLE] You are managing a portfolio of £20 million. Your target duration is 6 years, and you can choose from two bonds: a zero-coupon bond with 3 years of maturity and a perpetuity each currently yielding 5%. Next year, the target duration is 5 years. Which of the following statements are correct? Selected Answers: The duration of the perpetuity is 21. Next year's weight invested in the zero-coupon bond is 3/19. Answers: This year's weight invested in the perpetuity is 1/6. The duration of the perpetuity after one year is 21. The duration of the perpetuity is 21. The duration of the zero-coupon bond at the beginning is 6 years. Next year's weight invested in the zero-coupon bond is 3/19.
[MULTIPLE] You are managing a portfolio of £20 million. Your target duration is 6 years, and you can choose from two bonds: a zero-coupon bond with 3 years of maturity and a perpetuity each currently yielding 5%. Next year, the target duration is 5 years. Which of the following statements are correct? Selected Answers: The duration of the perpetuity is 21. Next year's weight invested in the zero-coupon bond is 3/19. Answers: This year's weight invested in the perpetuity is 1/6. The duration of the perpetuity after one year is 21. The duration of the perpetuity is 21. The duration of the zero-coupon bond at the beginning is 6 years. Next year's weight invested in the zero-coupon bond is 3/19.
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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How do you go around working this question out because I'm confused on it . If you could give a detailed explanation on why they are the answers and the others are wrong would be great. Thank you !
![[MULTIPLE] You are managing a portfolio of £20 million. Your target duration is 6 years, and you can choose from two bonds: a zero-coupon bond with 3 years of maturity and a perpetuity,
each currently yielding 5%. Next year, the target duration is 5 years. Which of the following statements are correct?
Selected Answers:
The duration of the perpetuity is 21.
Next year's weight invested in the zero-coupon bond is 3/19.
Answers:
This year's weight invested in the perpetuity is 1/6.
The duration of the perpetuity after one year is 21.
The duration of the perpetuity is 21.
The duration of the zero-coupon bond at the beginning is 6 years.
Next year's weight invested in the zero-coupon bond is 3/19.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8bf05edb-9794-4873-88ef-bbeba4f832ab%2Fa3e698e4-e5e9-42f2-84b7-ef0c40a95227%2Fgrkxxh_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[MULTIPLE] You are managing a portfolio of £20 million. Your target duration is 6 years, and you can choose from two bonds: a zero-coupon bond with 3 years of maturity and a perpetuity,
each currently yielding 5%. Next year, the target duration is 5 years. Which of the following statements are correct?
Selected Answers:
The duration of the perpetuity is 21.
Next year's weight invested in the zero-coupon bond is 3/19.
Answers:
This year's weight invested in the perpetuity is 1/6.
The duration of the perpetuity after one year is 21.
The duration of the perpetuity is 21.
The duration of the zero-coupon bond at the beginning is 6 years.
Next year's weight invested in the zero-coupon bond is 3/19.
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