Question
Suppose you have a choice between four bond portfolios: Portfolio A is composed of five 10-year bonds with a $1000 face value and annual coupons
Suppose you have a choice between four bond portfolios: Portfolio A is composed of five 10-year bonds with a $1000 face value and annual coupons paying 9%, and five 5-year bonds with a $1000 face value and annual coupons paying 10%. Portfolio B is composed of ten 10-year coupon bonds with a $1000 face value with annual coupons paying 9%. Portfolio C is composed of five 10-year bonds with a face value of $1000 and coupons paying 9%, and a 10-year bond with a face value of $5000 and coupon paying 10%. Portfolio D is composed of a one 10-year $10,000 bond paying 9.25%. Which portfolio has the highest duration?
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