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Problem 11-17 You are managing a portfolio of $1.9 million. Your target duration is 12 years, and you can choose from two bonds: a zero-coupon
Problem 11-17 You are managing a portfolio of $1.9 million. Your target duration is 12 years, and you can choose from two bonds: a zero-coupon bond with maturity 4 years, and a perpetuity, each currently yielding 4%. Required: (a) How much of each bond will you hold in your portfolio? (Round your answers to 4 decimal places.) Zero-coupon bond Perpetuity bond (b)How will these fractions change next year if target duration is now eleven years? (Round your answers to 4 decimal places.) Zero-coupon bond Perpetuity bond
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