How much money will you receive for the mature bond

Reference no: EM132173393

Question - In the market there are 5-year zero coupon bonds with a yield of 4% and 9-year zero coupon bonds with a yield of 6% available. Both have a face value of AUD 100.

a) How can you combine the bonds to create a portfolio with a duration of 7?

b) What will be the expected return on this portfolio? It is now the year 2022, the 5-year zero coupon bond is due and the 4-year yield is 7%.

c) How much money will you receive for the mature bond?

Reference no: EM132173393

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