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yawa3891 [41]
3 years ago
6

A ten-year note is priced at par and has a (modified) duration of 7.8 years. A twenty-five year bond has a (modified) duration o

f 12 years and is priced at a discount. Your portfolio consists of some of the 10-year and some of the 25-year. Your portfolioâ s (modified) duration is:
Business
1 answer:
harina [27]3 years ago
6 0

Answer:

Between 7.8 and 12 Years

Explanation:

The modified duration of a portfolio is defined as a weighted average in the modified duration of an individual bonds. Therefore it will lie between the extreme values of the modified duration of the bonds in portfolio so that the weights are all positive.

In the context, the modified duration lies between 7.8 years and 12 years as the modified duration would always lie between the lowest modified duration and the highest modified duration of any bonds in a portfolio. Therefore the weights are value that will lie between these two years.

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Answer:

Yield to maturity is 3.94%

Explanation:

Yield to maturity is the annual rate of return that an investor receives if a bond bond is held until the maturity.

Face value = F = $1,000

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Number of payment = n = 10 years x 2 = 20

Yield to maturity = [ C + ( F - P ) / n ] / [ (F + P ) / 2 ]

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3 years ago
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Answer:

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Using mid point method

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Elasticity of Demand = Change in demand / Change in price

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