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(ii) You are managing a portfolio to pay your liabilities in 10 years' time. The liability is $1,000,000 and your target duration is 10 years.

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(ii) You are managing a portfolio to pay your liabilities in 10 years' time. The liability is $1,000,000 and your target duration is 10 years. You can invest in two bonds, a zerocoupon bond and a perpetual bond. Following are data provided for both bonds: Requirement: A) What should be the duration of asset portfolio? (2 marks) B) What should be the weights of bond A and bond B in the portfolio to meet the liability in 10 years? (4 marks) C) How much you shall invest today to meet the liability in 10 years? ( 3 marks) D) How much amount you should invest in Bond A and Bond B? ( 3 marks) E) How many of Bond A and Bond B you should include in your portfolio? ( 3 marks) (ii) You are managing a portfolio to pay your liabilities in 10 years' time. The liability is $1,000,000 and your target duration is 10 years. You can invest in two bonds, a zerocoupon bond and a perpetual bond. Following are data provided for both bonds: Requirement: A) What should be the duration of asset portfolio? (2 marks) B) What should be the weights of bond A and bond B in the portfolio to meet the liability in 10 years? (4 marks) C) How much you shall invest today to meet the liability in 10 years? ( 3 marks) D) How much amount you should invest in Bond A and Bond B? ( 3 marks) E) How many of Bond A and Bond B you should include in your portfolio? ( 3 marks)

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