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  3. a portfolio consists of the following two investme

A portfolio consists of the following two investments: a bond with face value of...

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Finance

A portfolio consists of the following two investments:

  • a bond with face value of $100.00 paying annual coupons of 11% maturing in 5 years
  • an annuity with payments of $50.00 at the end of each year for 5 years

The portfolio is comprised of 48% bonds and 52% annuities.

The term structure is flat and the current yield is 12% pa effective.

Calculate the duration (D) of the portfolio. Give your answer to 2 decimal places.

D = ____ years

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