Eliot Karin is a 35-year-old bank executive who has just inherited a large sum of money. Having spent several years in the bank's investments department, he's well aware of the concept of duration and decides to apply it to his bond portfolio. In particular, Elliot intends to use $1 million of his inheritance to purchase 4 U.S. Treasury bonds: 1. An 8.69% , 13-year bond that's priced at $1,100.37 to yield 7.47 %. 2.A7.777 % , 15-year bond that's priced at $1021.98 to yield 7.53 % 3.A 20-year stripped Treasury (zero coupon) that's priced at $198.90 to yield 8.24 % . 4. A 24-year, 7.47 % bond that's priced at $963.39 to yield 7.81 % . Note that these bonds are semiannual compounding bonds. a. Find the duration and the modified duration of each bond. b. Find the duration of the whole bond portfolio if Eliot puts $250,000 into each of the 4 U.S. Treasury bonds. c. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4 d. Which portfollo-b or e-should Eliot select if he thinks rates are about to head up and he wants to avoid as much price volatility as possible? Explain. From which portfolo does he stand to make more in annual interest income? Which portfolio would you recommend, and why? a. The duration and modified duration can be calculated using a spreadsheet, such as Excel. It gives the precise duration measure because it avoids the rounding-off errors, which are inevitable with manual calculations Bond 1: 13 years, 8.69 %, priced to yield 7.47 % The duration of this bond is years. (Round to two decimal places ) years. (Round to two decimal places.) The modified duration of this bond is Bond 2: 15 years, 7.777 % priced to yield 7.53 % years. (Round to two decimal places.) The duration of this bond is Click to select your answerls). w 19 MacBook Pro Q Search or type URL rates are about to head up and he wants to avoid a stand to make more in annual interest income? Which portfolio would you recommend, and why? The modified duration of this bond is years. (Round to two decimal places.) Bond 2: 15 years, 7.777% priced to yield 7.53%. The duration of this bond is years. (Round to two decimal places.) The modified duration of this bond is years. (Round to two decimal places.) Bond 3: 20 years, zero coupon, priced to yield 8.24% The duration of this bond is years. (Round to two decimal places.) Click to select your answer(s). OCT 19 MacBook Pro a. Find the duration and the mod ified duration of each bond. b. Find the duration of the whole bond portfolio if Elliot puts $250,000 into each of the 4 U.S. T c. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $1 70,0 d. Which portfolio-b or c-should Elliot select if he thinks rates are about to head up and he stand to make more in annual interest income? Which portfolio would you recommend, and wh Bond 3: 20 years, zero coupon, priced to yield 8.24% The duration of this bond is years. (Round to two decimal places.) The modified duration of this bond is years. (Round to two decimal places.) Bond 4: 24 years, 7.47% , priced to yield 7.81%. years. (Round to two decimal places.) The duration of this bond is years. (Round to two decimal places.) The modified duration of this bond is Click to select your answer(s). OCT 19 puts $250,000 into each of the 4 U.S. Treasury bonds. c. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4 d. Which portfolio-b or c-should Elliot select if he thinks rates are about to head up and he wants to avoid as much price vola stand to make more in annual interest income? Which portfolio would you recommend, and why? The moditied duration of this bond is years. (Round to two decimal places.) Bond 4: 24 years, 7.47%, priced to yield 7.81% The duration of this bond is years. (Round to two decimal places.) The modified duration of this bond is years. (Round to two decimal places.) b. Find the duration of the whole bond portfolio if Elliot puts $250,000 into each of the 4 U.S. Treasury bonds. The duration of this portfolio is years. (Round to two decimal places.) c Find the duration of the nortfolin if Flint nute $330 000 each into honds 1 and 3 and $170 000 each intn honds 2 and 4 Click to select your answer(s). OCT 19 MacBook Pro 1ADI Bariblio. In particular, Eliot intends to use $1 million of his inheritance to purchase 4 U.S. Treasury bonds Investments department, he's well aware of the con 1. An 8.69% , 13-year bond that's priced at $1,100.37 to yield 7.47 % 2. A 7.777%, 15-year bond that's priced at $1021.98 to yield 7.53% . 3. A 20-year stripped Treasury (zero coupon) that's priced at $198.90 to yield 8.24 %. 4. A 24-year, 7.47 % bond that's priced at $963.39 to yield 7.81 % . Note that these bonds are semiannual compounding bonds. a. Find the duration and the modified duration of each bond. b. Find the duration of the whole bond portfolio if Elliot puts $250,000 into each of the 4 U.S. Treasury bonds. c. Find the duration of the portfolio if Eliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4 d. Which portfolio-b or c-should Eliot select if he thinks rates are about to head up and he wants to avoid as much price volatility as possible? Explain. From which portfolio does he stand to make more in annual interest income? Which portfolio would you recommend, and why? The modified duration of this bond isyears. (Round to two decimal places.) b. Find the duration of the whole bond portfolio if Elliot puts $250,000 into each of the 4 U.S. Treasury bonds. The duration of this portfolio is years. (Round to two decimal places.) e. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4. The duration of this portfolio is years. (Round to two decimal places.) d. Which portfolio-the portfolio in part b or the portfolio in part e-should Eliot select if he thinks rates are about to head up and he wants to avoid as much price volatility as possible? (Chonse the hest answer heimw Click to select your answerfs). X 19 MacBook Pro Q Search or type URL C & 7 5 4 2 CC LO A st Elliot Karlin is a 35-year-old bank executive who has just inherited a large sum of money. Having spent several years in the bank's investments department, he's well aware of the concept of duration and decides to apply it to his bond portfolio. In particular, Elliot intends to use $1 million of his inheritance to purchase 4 U.S. Treasury bonds: 1. An 8.69 % , 13-year bond that's priced at $1,100.37 to yield 7.47 % 2.A7.777%, 15-year bond that's priced at $1021.98 to yield 7.53 %. 3. A 20-year stripped Treasury (zero coupon) that's priced at $198.90 to yield 8.24 %. 4.A 24-year, 7.A7 % bond that's priced at $963.39 to yield 7.81 % . Note that these bonds are semiannual compounding bonds a. Find the duration and the modified duration of each bond. b. Find the duration of the whole bond portfollo if Eliot puts $250,000 into each of the 4 U.S. Treasury bonds. c. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4 d. Which portfolio-b or c-should Eliot select if he thinks rates are about to head up and he wants to avoid as much price volatity as possible? Explain. From which portfolo does he stand to make more in annual interest income? Which portfolio would you recommend, and why? uaG ure uear anawor ueuw.y He should invest in the portfolio in part c. The portiolio in part c has a higher duration than the portfolio in part b. If rates are about to rise, then it is riskier to invest in the portfolio in part b, because it would be more price volatle than the other portfolio. A. B. He should invest in the portfolio in part e. The portfolio in part b has a higher duration than the portfolio in part e. If rates are about to rise, then it is safer to invest in the portfolio in part c, because it would be less price volatile than the other portfolio. O C. He should invest in the portfolio in part b. The portfolio in part c has a higher duration than the portfolio in part b. If rates are about to rise, then it is safer to invest in the portfolio in part b, because it would be less price volatile than the other portfolio. D. He should invest in either portfolio. The portfolio in part e has a higher duration than the portfolio part b. If rates are about to rise, then t is equaly safe to invest in elther portfolio, because both portfolios would be equally price volatile Click to select your answers). 19 MacBook Pro Q Search or type URL & % # 5 4 3 2 CO 7 Eliot Karin is a 35-year-old bank executive who has just inherited a large sum of money. Having spent several years in the bank's investments department, he's well aware of the concept of duration and decides to apply it to his bond portfolio. In particular, Elliot intends to use $1 million of his inheritance to purchase 4 U.S. Treasury bonds: 1. An 8.69% , 13-year bond that's priced at $1,100.37 to yield 7.47 %. 2.A7.777 % , 15-year bond that's priced at $1021.98 to yield 7.53 % 3.A 20-year stripped Treasury (zero coupon) that's priced at $198.90 to yield 8.24 % . 4. A 24-year, 7.47 % bond that's priced at $963.39 to yield 7.81 % . Note that these bonds are semiannual compounding bonds. a. Find the duration and the modified duration of each bond. b. Find the duration of the whole bond portfolio if Eliot puts $250,000 into each of the 4 U.S. Treasury bonds. c. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4 d. Which portfollo-b or e-should Eliot select if he thinks rates are about to head up and he wants to avoid as much price volatility as possible? Explain. From which portfolo does he stand to make more in annual interest income? Which portfolio would you recommend, and why? a. The duration and modified duration can be calculated using a spreadsheet, such as Excel. It gives the precise duration measure because it avoids the rounding-off errors, which are inevitable with manual calculations Bond 1: 13 years, 8.69 %, priced to yield 7.47 % The duration of this bond is years. (Round to two decimal places ) years. (Round to two decimal places.) The modified duration of this bond is Bond 2: 15 years, 7.777 % priced to yield 7.53 % years. (Round to two decimal places.) The duration of this bond is Click to select your answerls). w 19 MacBook Pro Q Search or type URL rates are about to head up and he wants to avoid a stand to make more in annual interest income? Which portfolio would you recommend, and why? The modified duration of this bond is years. (Round to two decimal places.) Bond 2: 15 years, 7.777% priced to yield 7.53%. The duration of this bond is years. (Round to two decimal places.) The modified duration of this bond is years. (Round to two decimal places.) Bond 3: 20 years, zero coupon, priced to yield 8.24% The duration of this bond is years. (Round to two decimal places.) Click to select your answer(s). OCT 19 MacBook Pro a. Find the duration and the mod ified duration of each bond. b. Find the duration of the whole bond portfolio if Elliot puts $250,000 into each of the 4 U.S. T c. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $1 70,0 d. Which portfolio-b or c-should Elliot select if he thinks rates are about to head up and he stand to make more in annual interest income? Which portfolio would you recommend, and wh Bond 3: 20 years, zero coupon, priced to yield 8.24% The duration of this bond is years. (Round to two decimal places.) The modified duration of this bond is years. (Round to two decimal places.) Bond 4: 24 years, 7.47% , priced to yield 7.81%. years. (Round to two decimal places.) The duration of this bond is years. (Round to two decimal places.) The modified duration of this bond is Click to select your answer(s). OCT 19 puts $250,000 into each of the 4 U.S. Treasury bonds. c. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4 d. Which portfolio-b or c-should Elliot select if he thinks rates are about to head up and he wants to avoid as much price vola stand to make more in annual interest income? Which portfolio would you recommend, and why? The moditied duration of this bond is years. (Round to two decimal places.) Bond 4: 24 years, 7.47%, priced to yield 7.81% The duration of this bond is years. (Round to two decimal places.) The modified duration of this bond is years. (Round to two decimal places.) b. Find the duration of the whole bond portfolio if Elliot puts $250,000 into each of the 4 U.S. Treasury bonds. The duration of this portfolio is years. (Round to two decimal places.) c Find the duration of the nortfolin if Flint nute $330 000 each into honds 1 and 3 and $170 000 each intn honds 2 and 4 Click to select your answer(s). OCT 19 MacBook Pro 1ADI Bariblio. In particular, Eliot intends to use $1 million of his inheritance to purchase 4 U.S. Treasury bonds Investments department, he's well aware of the con 1. An 8.69% , 13-year bond that's priced at $1,100.37 to yield 7.47 % 2. A 7.777%, 15-year bond that's priced at $1021.98 to yield 7.53% . 3. A 20-year stripped Treasury (zero coupon) that's priced at $198.90 to yield 8.24 %. 4. A 24-year, 7.47 % bond that's priced at $963.39 to yield 7.81 % . Note that these bonds are semiannual compounding bonds. a. Find the duration and the modified duration of each bond. b. Find the duration of the whole bond portfolio if Elliot puts $250,000 into each of the 4 U.S. Treasury bonds. c. Find the duration of the portfolio if Eliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4 d. Which portfolio-b or c-should Eliot select if he thinks rates are about to head up and he wants to avoid as much price volatility as possible? Explain. From which portfolio does he stand to make more in annual interest income? Which portfolio would you recommend, and why? The modified duration of this bond isyears. (Round to two decimal places.) b. Find the duration of the whole bond portfolio if Elliot puts $250,000 into each of the 4 U.S. Treasury bonds. The duration of this portfolio is years. (Round to two decimal places.) e. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4. The duration of this portfolio is years. (Round to two decimal places.) d. Which portfolio-the portfolio in part b or the portfolio in part e-should Eliot select if he thinks rates are about to head up and he wants to avoid as much price volatility as possible? (Chonse the hest answer heimw Click to select your answerfs). X 19 MacBook Pro Q Search or type URL C & 7 5 4 2 CC LO A st Elliot Karlin is a 35-year-old bank executive who has just inherited a large sum of money. Having spent several years in the bank's investments department, he's well aware of the concept of duration and decides to apply it to his bond portfolio. In particular, Elliot intends to use $1 million of his inheritance to purchase 4 U.S. Treasury bonds: 1. An 8.69 % , 13-year bond that's priced at $1,100.37 to yield 7.47 % 2.A7.777%, 15-year bond that's priced at $1021.98 to yield 7.53 %. 3. A 20-year stripped Treasury (zero coupon) that's priced at $198.90 to yield 8.24 %. 4.A 24-year, 7.A7 % bond that's priced at $963.39 to yield 7.81 % . Note that these bonds are semiannual compounding bonds a. Find the duration and the modified duration of each bond. b. Find the duration of the whole bond portfollo if Eliot puts $250,000 into each of the 4 U.S. Treasury bonds. c. Find the duration of the portfolio if Elliot puts $330,000 each into bonds 1 and 3 and $170,000 each into bonds 2 and 4 d. Which portfolio-b or c-should Eliot select if he thinks rates are about to head up and he wants to avoid as much price volatity as possible? Explain. From which portfolo does he stand to make more in annual interest income? Which portfolio would you recommend, and why? uaG ure uear anawor ueuw.y He should invest in the portfolio in part c. The portiolio in part c has a higher duration than the portfolio in part b. If rates are about to rise, then it is riskier to invest in the portfolio in part b, because it would be more price volatle than the other portfolio. A. B. He should invest in the portfolio in part e. The portfolio in part b has a higher duration than the portfolio in part e. If rates are about to rise, then it is safer to invest in the portfolio in part c, because it would be less price volatile than the other portfolio. O C. He should invest in the portfolio in part b. The portfolio in part c has a higher duration than the portfolio in part b. If rates are about to rise, then it is safer to invest in the portfolio in part b, because it would be less price volatile than the other portfolio. D. He should invest in either portfolio. The portfolio in part e has a higher duration than the portfolio part b. If rates are about to rise, then t is equaly safe to invest in elther portfolio, because both portfolios would be equally price volatile Click to select your answers). 19 MacBook Pro Q Search or type URL & % # 5 4 3 2 CO 7
