You are managing a portfolio of $2 million. Your target duration is 13.5 years, and you choose to invest in a combination of a zero coupon bond with maturity six years and a perpetuity, each currently yielding 5%. The amounts of investment in the zero coupon and the perpetuity should be: $625,000 and $1,375,000 $1,375,000 and $625,000 $2,000,000 and $0 $1,000,000 and $1,000,00
You are managing a portfolio of $2 million. Your target duration is 13.5 years, and you choose to invest in a combination of a zero coupon bond with maturity six years and a perpetuity, each currently yielding 5%. The amounts of investment in the zero coupon and the perpetuity should be: $625,000 and $1,375,000 $1,375,000 and $625,000 $2,000,000 and $0 $1,000,000 and $1,000,00
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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You are managing a portfolio of $2 million. Your target duration is 13.5 years, and you choose to invest in a combination of a zero coupon bond with maturity six years and a perpetuity, each currently yielding 5%. The amounts of investment in the zero coupon and the perpetuity should be:
- $625,000 and $1,375,000
- $1,375,000 and $625,000
- $2,000,000 and $0
- $1,000,000 and $1,000,000
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