FI International holds seven-year Acme International bonds and two-year Beta Corporation bonds. The Acme bonds are yielding 12 percent and the Beta bonds are yielding 14 percent under current market conditions.

a. What is the weighted-average maturity of FI's bond portfolio if 40 percent is in Acme bonds and 60 percent is in Beta bonds?

b. What proportion of Acme and Beta bonds should be held to have a weighted-average yield of 13.5 percent?

c. What will be the weighted-average maturity of the bond portfolio if the weighted-average yield is realized?

LO.1