4. Return to the original portfolio of 10 T and 5 F. How many S are needed to bring the portfolios Modified Duration to 5? Do this two ways: a) Treat the original portfolio with T and F separately. b) Consider the original portfolio as a combination of the T & F with one value and one modified duration.

5. Repeat #4 but target duration of 0.

*ONLY NEED ANSWER #5*

T o Ni TI two-year note five-year note seven-year note zero-coupon bond perpetuity money market instrument M bond T F S z P M maturity, yrs 2 5 7 5 oo 3 months price 100 99.5 99 duration 1.9 4.0 5.7 yield, % 2.5 3 3.3 3.1 3.9 2 All securities above have face value 100. The durations above are not Modified. T o Ni TI two-year note five-year note seven-year note zero-coupon bond perpetuity money market instrument M bond T F S z P M maturity, yrs 2 5 7 5 oo 3 months price 100 99.5 99 duration 1.9 4.0 5.7 yield, % 2.5 3 3.3 3.1 3.9 2 All securities above have face value 100. The durations above are not Modified