Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Today is 1 July 2021 . Joan has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A

image text in transcribedimage text in transcribed

Today is 1 July 2021 . Joan has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B ). Joan purchased all instruments on 1 July 2014 to create this portfolio and this portfolio is composed of 244 units of instrument A and 318 units of instrument B. - Instrument A is a zero-coupon bond with a face value of 100 . This bond matures at par. The maturity date is 1 January 2030. - Instrument B is a Treasury bond with a coupon rate of j2=2.97% p.a. and face value of 100 . This bond matures at par. The maturity date is 1 January 2024. (c) What is the current duration of instrument B? Express your answer in terms of years and round your answer to three decimal places. Assume the yield rate is j2=3.97% p.a. a. 4.854 b. 2.427 c. 2.891 d. 5.781 Today is 1 July 2021 . Joan has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B). Joan purchased all instruments on 1 July 2014 to create this portfolio and this portfolio is composed of 244 units of instrument A and 318 units of instrument B. - Instrument A is a zero-coupon bond with a face value of 100 . This bond matures at par. The maturity date is 1 January 2030. - Instrument B is a Treasury bond with a coupon rate of j2=2.97% p.a. and face value of 100 . This bond matures at par. The maturity date is 1 January 2024. (d) Based on the price in part a and part b, and the duration value in part c, calculate the current duration of Joan's portfolio. Express your answer in terms of years and round your answer to two decimal places. a. 4.62 b. 4.61 c. 5.95 d. 6.56 Today is 1 July 2021 . Joan has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B ). Joan purchased all instruments on 1 July 2014 to create this portfolio and this portfolio is composed of 244 units of instrument A and 318 units of instrument B. - Instrument A is a zero-coupon bond with a face value of 100 . This bond matures at par. The maturity date is 1 January 2030. - Instrument B is a Treasury bond with a coupon rate of j2=2.97% p.a. and face value of 100 . This bond matures at par. The maturity date is 1 January 2024. (c) What is the current duration of instrument B? Express your answer in terms of years and round your answer to three decimal places. Assume the yield rate is j2=3.97% p.a. a. 4.854 b. 2.427 c. 2.891 d. 5.781 Today is 1 July 2021 . Joan has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B). Joan purchased all instruments on 1 July 2014 to create this portfolio and this portfolio is composed of 244 units of instrument A and 318 units of instrument B. - Instrument A is a zero-coupon bond with a face value of 100 . This bond matures at par. The maturity date is 1 January 2030. - Instrument B is a Treasury bond with a coupon rate of j2=2.97% p.a. and face value of 100 . This bond matures at par. The maturity date is 1 January 2024. (d) Based on the price in part a and part b, and the duration value in part c, calculate the current duration of Joan's portfolio. Express your answer in terms of years and round your answer to two decimal places. a. 4.62 b. 4.61 c. 5.95 d. 6.56

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Management Principles And Practices

Authors: Sudhindra Bhat

2nd Edition

8174465863, 978-8174465863

More Books

Students also viewed these Finance questions

Question

Discuss various types of training methods.

Answered: 1 week ago

Question

Illustrate the value of different types of employment tests.

Answered: 1 week ago

Question

Outline key considerations when making a hiring decision.

Answered: 1 week ago