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Calculate the duration of the portfolio

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Reference no: EM133070650

A portfolio consists of the following two investments:

  • a bond with face value of $100.00 paying annual coupons of 6% maturing in 5 years
  • an annuity with payments of $55.00 at the end of each year for 5 years

The portfolio is comprised of 73% bonds and 27% annuities.

The term structure is flat and the current yield is 6% pa effective.

Calculate the duration (D) of the portfolio. Give your answer to 2 decimal places.

D =  years

Reference no: EM133070650

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