You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds: a zero-coupon bond with a maturity of five years, and a perpetuity, each currently yielding 10.0%. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) b. How will these weights change next year if the target duration is now nine years? (Round your answers to 2 decimal places.) **Portfolio Management Exercise**You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds: a zero-coupon bond with a maturity of five years, and a perpetuity, each currently yielding 10.0%.**a.** What weight of each bond will you hold to immunize your portfolio? *(Round your answers to 2 decimal places.)*| | ||------------------|-----|| Zero-coupon bond | % || Perpetuity bond | % |**b.** How will these weights change *next year* if the target duration is now nine years? *(Round your answers to 2 decimal places.)*| | ||------------------|-----|| Zero-coupon bond | % || Perpetuity bond | % |

You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 10.0 %. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) b. How will these weights change next year if target duration is now nine years? (Round your answers to 2 decimal places.)

You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five years and a perpetuity, each currently yielding 10.0 %. a. What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places.) b. How will these weights change next year if target duration is now nine years? (Round your answers to 2 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

Section: Chapter Questions

Problem 1PS

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