You invest in a fixed-income portfolio that has only two annual-coupon bonds. The YTM for both bonds is 7.5%. • Bond Quest a 4-year, 4.0% coupon with a $1,000 face value; current price of $882.77 • Bond Rapid is an 8-year, 11.0% coupon with a $1,000 face value; current price of $1,205.01 What is the portfolio duration, that is, the duration of both instruments considered together, using the prices of the bonds? (Hint: This is not just the arithmetic average of the two individual bond durations.) 4.84 years 5.01 years 4.42 years 3.76 years 5.25 years
You invest in a fixed-income portfolio that has only two annual-coupon bonds. The YTM for both bonds is 7.5%. • Bond Quest a 4-year, 4.0% coupon with a $1,000 face value; current price of $882.77 • Bond Rapid is an 8-year, 11.0% coupon with a $1,000 face value; current price of $1,205.01 What is the portfolio duration, that is, the duration of both instruments considered together, using the prices of the bonds? (Hint: This is not just the arithmetic average of the two individual bond durations.) 4.84 years 5.01 years 4.42 years 3.76 years 5.25 years
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:You invest in a fixed-income portfolio that has only two annual-coupon bonds. The YTM
for both bonds is 7.5%.
• Bond Quest a 4-year, 4.0% coupon with a $1,000 face value; current price of $882.77
• Bond Rapid is an 8-year, 11.0% coupon with a $1,000 face value; current price of
$1,205.01
What is the portfolio duration, that is, the duration of both instruments considered together,
using the prices of the bonds? (Hint: This is not just the arithmetic average of the two individual
bond durations.)
4.84 years
5.01 years
4.42 years
3.76 years
5.25 years
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