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You are managing a portfolio of $10 million. Your laget duration is 26 years, and you can choose from two bonds: a zero-coupon bond with
You are managing a portfolio of $10 million. Your laget duration is 26 years, and you can choose from two bonds: a zero-coupon bond with maturity five years, and a perpetuity, each currently yielding 2% a. How much of the zero-coupon bond and the perpetully will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) % Zero-coupon bond Perpetuty bond b. How will these fractions chanoe next year if target duration is now twenty five years? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero-coupon bond Perpetuty bond
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