The trustees of a pension fund are creating a portfolio of fixed income securities in which to invest. They would like to invest 98% of their $500,000 fund in the portfolio, leaving 2% in cash. They do not want to invest any more than 13% of the total fund in any given asset category.

The "investment universe" (all asset categories available) is described in the table below. The Excel functions PRICE() and DURATION() have been used to calculate the current prices and durations. The trustees would like to minimize portfolio duration (for this exercise, you can approximate portfolio duration by calculating the weighted average of the individiual assets' durations) while achieving at least a 4% portfolio return. How should they allocate their funds in order to acheive these objectives?

	20 Year Bond	15 Year Bond	10 Year Bond	5 Year Bond	3 Year Bond	3 Year Bond	3 Year Bond	3 Year Bond	1 Year T Bill		Settlement Date
Coupon	10%	9%	8%	7%	6%	7%	8%	8%	0%		2020-08-20
Remaining Term	20	15	10	5	3	2	1	0.5	1
Days in Year	365	365	365	365	365	365	365	365	365
Maturity Date	2040-08-15	2035-08-17	2030-08-18	2025-08-19	2023-08-20	2022-08-20	2021-08-20	2021-02-18	2021-08-20
Frequency	2	2	2	2	2	2	2	2	2
Face Value	100	100	100	100	100	100	100	100	100
YTM	8.20%	7.20%	6.30%	5%	3.90%	3%	2.20%	1.70%	2.25%
Current Price	117.54	116.34	112.47	108.75	105.89	107.71	105.71	103.09	97.79
Duration	9.77	8.98	7.25	4.33	2.80	1.90	0.98	0.49	1.00