Question
You need to create a portfolio with a duration of 8 years. You can use a 5 year zero-coupon bond and a perpetuity which pays
You need to create a portfolio with a duration of 8 years. You can use a 5 year zero-coupon bond and a perpetuity which pays $100 each and every year forever and has yield of 10%. How much of the portfolio value in percentage you would have to invest in the zero-coupon bond, and how much in the perpetuity?
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Fundamentals Of Financial Management Concise
Authors: Eugene F. Brigham, Joel F. Houston
11th Edition
0357517717, 9780357517710
