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Calculate the current duration of Siobhán portfolio

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Reference no: EM132975281

Question - Today is 1 July 2020. Siobhán has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B). Siobhán purchased all instruments on 1 July 2014 to make this portfolio and this portfolio is composed of 25 units of instrument A and 22 units of instrument B.

Instrument A is a zero-coupon bond with a face value of 100. This bond matures at par. The maturity date is 1 January 2030.

Instrument B is a Treasury bond with a coupon rate of j2 = 4.17% p.a. and face value of 100. This bond matures at par. The maturity date is 1 January 2023.

Calculate the current duration of Siobhán's portfolio using a yield to maturity of j2 = 3.1% p.a. Express your answer in terms of years and round your answer to two decimal places.

a.  5.46

b.  6.71

c.  5.62

d.  7.14

Reference no: EM132975281

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