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Reference no: EM13102002

1)A bond has a par value of $1000, a time to maturity of 8 years, and a coupon rate of 6% with interest paid annually.If the current market price is $765,
Suppose the interest rate falls to 9% right after the bond is purchased and stay at that level. What will be the holders's holding period yield if the bond is sold after 2 year ?

2)You need to create a portfolio with a duration of 6 years. You can use a 3 year zero-coupon bond and a perpetuity which pays $80 each and every year forever and has yield of 10%. how much of the porfolio value in percentage you would have to invest in the zero-coupon bond, and how much in the perpetuity ?

Reference no: EM13102002

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