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You are managing a portfolio of $1 million. Your target duration is 10 years, and you can invest in two bonds, a zero-coupon bond with maturity of five 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.)

Zero coupon bond: %

Perpetuity bond: %

b. How will these weights change next year if target duration is now nine years? (Round your answers to 2 decimal places.)

Zero coupon bond: %

Perpetuity bond: %

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92822860

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