What is the duration of instrument B

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Question - Today is 1 July 2020. Sandra has a portfolio which consists of two different types of financial instruments (henceforth referred to as instrument A and instrument B). Sandra purchased all instruments on 1 July 2013 to make this portfolio and this portfolio is composed of 35 units of instrument A and 21 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 = 4.87% p.a. and face value of 100. This bond matures at par. The maturity date is 1 January 2023.

What is the duration of instrument B? Express your answer in terms of years and round your answer to three decimal places. Assume the yield rate is j2 = 3.25% p.a.

Reference no: EM132974840

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