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Q5 WealthBuild Superannuation Fund is attempting to balance one of the bond portfolios under its management. The fund has identified three bonds which have five-year
Q5 WealthBuild Superannuation Fund is attempting to balance one of the bond portfolios under its management. The fund has identified three bonds which have five-year maturities and which trade at a yield to maturity of 9 per cent. Par value of these bonds is $1000. The bonds differ only in that the coupons are 7 per cent, 9 per cent and 11 per cent. (a) What is the duration for each bond? (b) What is the relationship between duration and the amount of coupon interest that is paid? Plot the relationship.
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