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Today is 1 July, 2019. Carole has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and
Today is 1 July, 2019. Carole has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B). Carole purchased all instruments on 1 July 2014 to create this portfolio, which is composed of 28 units of instrument A and 22 units of instrument B. Instrument A is a zero-coupon bond with a face value of $100. This bond matures at par. Its maturity date is 1 January 2029 Instrument B is a Treasury bond with a coupon rate of j2=4.64% p.a. and a face value of $100. This bond matures at par. Its maturity date is 1 January 2022. What is the duration of instrument B? Express your answer in terms of years and round your answer to three decimal places. Assume a yield rate of jz=2.19% p.a. O a. 2.393 years O b. 4.786 years O c. 2.842 years O d. 5.683 years
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