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You are managing a portfolio of $5 million. Your target duration is 10 years, and you can allocate your investment of $5 million in two

You are managing a portfolio of $5 million. Your target duration is 10 years, and you can allocate your investment of $5 million in two bonds: a zero-coupon bond with maturity of 5 years and a perpetuity, each currently yielding 5%. How much will you invest in each bond this year? How much will you invest in each bond next year if target duration is 9 years then?

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