a. Value of liability today: b, c. Coupon payment: Original YTM YTM decrease YTM increase Reinvestment YTM: Coupon rate: Value of Value of Value of reinvested reinvested reinvested Six-month Coupon coupons at coupons at coupons at Year period payment Year 5 Year 5 Year 5 1 1 A SODYOUAWN Future value of coupons: Par value received: Total portfolio value: d. Since the liability is a lump sum in five years, the duration is equal to the maturity, or five years. Macaulay duration: Bond A: Bond B: Bond weights: Bond A: d B