2. Portfolio X consists of a 1-year zero-coupon bond with a face value of $2,000, and a 10 year zero-coupon bond with a face value of $5000. Portfolio Y consists of a 5.63 year zero-coupon with a face-value of $5000. The current yield on all the bonds considered is 10% per annum.

a) What is the duration of the two portfolios?

b) Use duration to estimate the impact of a 0.5% decrease in the interest rate on the present values of the two portfolios