You are managing a portfolio of $1 million. Your target duration is 10 years, and...
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Accounting
You are managing a portfolio of $1 million. Your target duration is 10 years, and you can choose from two bonds: a zero-coupon bond with maturity of 5 years, and a perpetuity, each currently yielding 5.4%.
a.
What weight of each bond will you hold to immunize your portfolio? (Round your answers to 2 decimal places. Omit the "%" sign in your response.)
Zero-coupon bond
%
Perpetuity bond
%
b.
How will these weights change nextyear if target duration is now 9 years? (Round your answers to 2 decimal places. Omit the "%" sign in your response.)
Zero-coupon bond
%
Perpetuity bond
%
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