Meroy Karthik is a bank executive who has just inherited a large sum of money. Having spent several years in the bank’s investments department, he is well aware of the concept of duration - convexity and decides to apply it to his bond portfolio.In particular, Meroy intends to use RM1 millions of his inheritance to purchase two Malaysian Treasury Bonds:Prepare the duration and the modified duration table of each bond. Find the duration of the portfolio if Meroy allocates 70 percent into Bonds GO190001 and 30 percent into Bond MO190002. Type of BondGO190001MO190002Characteristics of BondsAn 8.5%, 4-year bond with a par value of RM1,000 and yield at7.47%.An 8.5%, 4-year bond with a par value of RM1,000 and yield at8.57%.

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Answered: Type of Bond GO190001 MO190002…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 14P: Current Yield with Semiannual Payments A bond that matures in 7 years sells for $1,020. The bond has...

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Meroy Karthik is a bank executive who has just inherited a large sum of money. Having spent several years in the bank’s investments department, he is well aware of the concept of duration - convexity and decides to apply it to his bond portfolio.

In particular, Meroy intends to use RM1 millions of his inheritance to purchase two Malaysian Treasury Bonds:

Prepare the duration and the modified duration table of each bond.

Find the duration of the portfolio if Meroy allocates 70 percent into Bonds GO190001 and 30 percent into Bond MO190002.

Type of Bond
GO190001
MO190002
Characteristics of Bonds
An 8.5%, 4-year bond with a par value of RM1,000 and yield at
7.47%.
An 8.5%, 4-year bond with a par value of RM1,000 and yield at
8.57%.

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