Invest in the zero-coupon bond-how much in the perpetuity

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Reference no: EM13951808

You need to create a portfolio with 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?

Reference no: EM13951808

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