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You are managing a portfolio of $ 1 million. Your target duration is 1 0 years, and you can choose from two bonds: a zero
You are managing a portfolio of $ million. Your target duration is years, and you can choose from two bonds: a zerocoupon bond with maturity years, and a perpetuity, each currently yielding
a How much of each bond will you hold in your portfolio?
b How will these fractions change next year if target duration is now nine years?
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