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 2013 to create this portfolio, which is composed of 21 units of instrument A and 41 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=4.05% 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=4.6% p.a. Express your answer in terms of years and round your answer to two decimal places.

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
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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 2013 to create this
portfolio, which is composed of 21 units of instrument A
and 41 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=4.05% 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=4.6% p.a. Express your answer in
terms of years and round your answer to two decimal
places.
a. 5.73 years
O b. 4.19 years
O c. 4.17 years
O d. 6.38 years
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 2013 to create this portfolio, which is composed of 21 units of instrument A and 41 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=4.05% 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=4.6% p.a. Express your answer in terms of years and round your answer to two decimal places. a. 5.73 years O b. 4.19 years O c. 4.17 years O d. 6.38 years
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