Portfolio a consists of a one-year zero-coupon bond with a, Ask an Expert

Economics

Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and a 10-year zero-coupon bond with a face value of $6,000. Portfolio B consists of a 5.95-year zero-coupon bond with a face value of $5,000. The current yield on all bonds is 10% per annum.

(a) Show that both portfolios have the same duration.

(b) Show that the percentage changes in the values of the two portfolios for a 0.1% per annum increase in yields are the same.

Explain.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91673488

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