ABCDBondA $1,000 twenty-year 4%coupon bond with theinterest rate of 6%A $1,000 ten-year 7%coupon bond with theinterest rate of 5%A $1,000 eight-year discount 20bond with the interest rateof 7%A $1,000 five-year 5%coupon bond with theinterest rate of 4.5%Portfolio Weight (%)What is the duration of your portfolio of four bonds?301535

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What is the duration of your portfolio of four bonds?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 5P: Default Risk Premium A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate...

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Concept explainers

Bond Valuation

Bond valuation are the notes issued by the corporation to raise long-term funds for the business. The corporations are required to pay the interest on such liabilities at a specified rate of interest (termed as coupon rate) at specified dates which may be on semi-annual or annual basis. These interest payments may be in the form of coupons.

Question

A
B
C
D
Bond
A $1,000 twenty-year 4%
coupon bond with the
interest rate of 6%
A $1,000 ten-year 7%
coupon bond with the
interest rate of 5%
A $1,000 eight-year discount 20
bond with the interest rate
of 7%
A $1,000 five-year 5%
coupon bond with the
interest rate of 4.5%
Portfolio Weight (%)
What is the duration of your portfolio of four bonds?
30
15
35

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