You are asked to invest $30 million in a bond portfolio consisting of only two bonds. Bond A has a yield of 6% and is a 5 year coupon bond a duration of 4.36 years, and bond B has a yield 7% and is a 7 year coupon bond duration of 6.50 years. The portfolio is to have an investment horizon of 5 years. How much of each bond issue would you have to buy to immunize the portfolio? A. Invest in 70 percent bond A and 30 percent bond B. B. Invest in 60 percent bond A and 40 percent bond B. C. Invest in 30 percent bond A and 70 percent bond B D. Invest in 40 percent bond A and 60 percent bond B

You are asked to invest $30 million in a bond portfolio consisting of only two bonds. Bond A has a yield of 6% and is a 5 year coupon bond a duration of 4.36 years, and bond B has a yield 7% and is a 7 year coupon bond duration of 6.50 years. The portfolio is to have an investment horizon of 5 years. How much of each bond issue would you have to buy to immunize the portfolio? A. Invest in 70 percent bond A and 30 percent bond B. B. Invest in 60 percent bond A and 40 percent bond B. C. Invest in 30 percent bond A and 70 percent bond B D. Invest in 40 percent bond A and 60 percent bond B

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 4P

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