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Today is 1 July, 2019. Kitty has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and
Today is 1 July, 2019. Kitty has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B). Kitty purchased all instruments on 1 July 2013 to create this portfolio, which is composed of 37 units of instrument A and 36 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=4.95% 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 j2=2.26% p.a. a. 2.832 years b. 5.664 years c. 4.773 years d. 2.386 years
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