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Youve created a small bond portfolio by investing excess corporate cash in two annual-coupon bonds. The YTM for both bonds is 7.5% Bond Q is a 5-year, 4.5% coupon with a $1,000 face value; current price of $878.62 Bond R is a 6-year, 9.5% coupon with a $1,000 face value; current price of $1,093.88 What is the portfolio duration, that is, the duration of both instruments considered together, using the prices of the bonds. (Hint: This is not just the arithmetic average of the two individual bond durations.) O A.4.74 years 4.90 years 5.16 years O D.5.72 years 5.93 years O B

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Home nert Page Layout Formulas Data Review View dd-Ins s Cut ta copy. E AutoSum Wrap Text В 1 프 . O, ▲· 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter u. Clipboard BV51 BR Alignment Number Cells Edting BS BT BU BV BW BX BY BZ CA CD CE 36 37 38 39 40 BOND B C-A B D*P PAYMENT PVFACTOR PVOFPMT % DURATION YEAR 7.50% 0.9302 41.8605 0.8653 38.9400 0.8050 36.2232 0.7488 33.6960 0.6966727.9038 WEIGHT YEARS 45 45 45 45 1045 0.0476 0.0443 0.0412 0.0384 0.8285 0.0476 0.0886 0.1237 0.1534 4.1423 42 43 4 45 46 47 48 49 50 51 52 53 54 PRICE 878.6235 1.0000 DURATION 4.5557 BOND Q C-A B PAYMENT PVFACTOR PVOFPMT % DURATION 4 H KE CAPM UTILITY, SH beta bond M port future INDEX INTL CAP BUD ING PV, FV, ANNUITYDIR cleanYIELD bond stru WACC RES1 ex di rences: BB118 福 130% 07:13 27-01-2019Home nert Page Layout Formulas Data Review View dd-Ins Cut Copy ー E ゴWrap Text B า 프 . O, ▲· 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter u. Clipboard Alignment Number Cells Edting BT67 BS BT BOND Q BU BV BW BX BY BZ CA CD CE 52 53 54 C-A B PAYMENT PVFACTOR PVOFPMT % DURATION YEAR 7.50% 0.9302 88.3721 0.865382.2066 0.805076.4713 0.7488 71.1361 0.696666.1731 0.6480 709.5179 WEIGHT YEARS 56 57 58 59 60 61 62 63 95 95 95 95 95 1095 0.0808 0.0752 0.0699 0.0650 0.0605 0.6486 1.0000 0.0808 0.1503 0.2097 0.2601 0.3025 3.8918 PRICE 1093.8769 DURATION 4.8952 65 67 69 70 1 KE CAPM , UTILITY, SH beta bond future INDEX INTL CAP BUDLEASING PV, FV, ANNUITYDIR cleanYIELD bond tru WACC RESI ex d erences: P33 130% 07:13 27-01-2019Home nert Page Layout Formulas Data Review View dd-Ins Cut Σ AutoSum Wrap Text aCopy В 1 프 . O, ▲· 逻锂函Merge & Center. $, % , 弼,8 C Conditional Format CeInsert Delete Format Formatting as Table Styles2 Clear Sort &Find & Format Painter u. Clipboard BX77 BR Alignment Number Cells Edting BS BT BU BV BW BX BY BZ CA св CD CE 67 68 69 70 71 72 73 74 75 76 PORTFOLIO DURATION BOND PRICE WEIGHT DURATION WEIGHTED DURATION WED 878.62 1093.88 1972.5 0.4454 0.5546 1.0000 4.5557 4.8952 2.0293 2.7147 PORTFOLIO DURATION = 4.7439 ANSWER:A 4.74 78 79 80 81 82 83 84 1 KE CAPM , UTILITY, SH beta bond future INDEX INTL CAP BUDLEASING PV, FV, ANNUITYDIR cleanYIELD bond tru WACC RESI ex d erences: BB116 130% 07:13 27-01-2019

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