You are managing a portfolio of $1.3 million. Your target duration is 10 years, and...
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Accounting
You are managing a portfolio of $1.3 million. Your target duration is 10 years, and you can choose from two bonds: a zero-coupon bond with maturity 5 years, and perpetuity, each currently yielding 8%.
a. How much of each bond will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Zero-coupon bond %
Perpetuity bond %
b. How will these fractions change next year if the target duration is now twelve years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Zero-coupon bond. %
Perpetuity bond %
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