You’ve created a small bond portfolio by investing excess corporate cash in two annual-coupon bonds. The...

You’ve created a small bond portfolio by investing excess corporate cash in two annual-coupon bonds. The YTM for both bonds is 7%.

Bond Q is a 4-year, 5% coupon with a $1,000 face value; current price of $932.26
Bond R is a 6-year, 10% coupon with a $1,000 face value; current price of $1,143.00

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.)

A. 4.29 years

B. 4.35 years

C. 4.56 years

D. 4.72 years

E. 5.25 years

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago

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