Q11.5 Using the resources available at your campus or public library (or on the Internet), select any six bonds you like, consisting of two Treasury bonds, two state bonds and two corporate bonds. Determine the latest current yield and promised yield for each. (For promised yield, use annual compounding.) In addition, find the duration and modified duration for each bond.

a. Assuming that you put an equal amount of money into each of the six bonds you selected, find the duration for this six-bond portfolio.

b. What would happen to your bond portfolio if market interest rates fell by 100 basis points?

c. Assuming that you have $100 000 to invest, use at least three of these bonds to develop a bond portfolio that emphasises either the potential for capital gains or the preservation of capital. Briefly explain your logic.