A portfolio contains only one bond and nothing else. This bond, Bond Y, has a 4% annual coupon, matures in 5 years from today, and is currently yielding 4.35%. All rates are expressed on an effective annual basis. A Treasury bond maturing in 4 years from today, carrying an annual coupon of 2.15%, and currently trading at par is available for duration-hedging purposes. The Bond Y portfolio is currently unhedged with interest rates, but you would like to use the Treasury bond to manage this risk. If the market value of the unhedged portfolio is $1,205,889 on the LONG side, what market value of the Treasury bond should be held on the SHORT side to create a 60.47% duration-hedged portfolio? That is, you would like 60.47% of the market value of the LONG side hedged. (Assume that, in these calculations, duration hedging uses Macaulay duration.)

Question 17 options:

	$783,471
	$805,234
	$826,997
	$848,760
	$870,523