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Key rate duration I have a portfolio of two fixed rate bonds. Bond A is a 2 year, $100 par value US govt bond, coupon=5% (per annum), payable annually. Bond B is a 4 year, $100 par value US govt bond, coupon=6% (per annum), payable annually. Assume the relevant term structure from the price of US government STRIPS is : d(1Y)=0 .95 d(2Y)=0.91 d(3Y)= 0.87 d(4Y)= 0.83

a. What are the relevant nonzero key rate durations for Bond A?

b. What are the relevant nonzero key rate durations for Bond B?

c. What are the relevant nonzero key rate durations for the entire portfolio? Note: You may need to refer to the result for Fisher-Weil duration of a portfolio of bonds in question 4 below, and make an educated guess here.

d. What is the Fisher-Weil duration Bond A, Bond B, and the entire portfolio?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91774042

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