You are managing a portfolio of $2.7 million. Your target duration is 15 years, and you can choose from two bonds: a zero-coupon bond with maturity 10 years, and a perpetuity, each currently yielding 5%.

a.

How much of each bond will you hold in your portfolio? (Do not round intermediate calculations. Round your answers to 2 decimal places.) b. How will these fractions change next year if target duration is now fourteen years? (Do not round intermediate calculations. Round your answers to 2 decimal places.)