Question

Elliot Karlin is a 35-year-old bank executive who has just inherited a large sum of money. Having spent several years in the bank's investments department, he's well aware of the concept of duration and decides to apply it to his bond portfolio. In particular, Elliot intends to use $1 million of his inheritance to purchase four U.S. Treasury bonds:

QUESTIONS: thumbs up for correct answers

A.

An 8.67%​, ​13-year bond​ that's priced at $1,099.60 to yield 7.46%.

The duration of this bond is (blank) years ?

A 7.849 % ​15-year bond​ that's priced at $ 1026.57 to yield 7.55%.

The duration of this bond is (blank) years ?

A​ 20-year stripped Treasury​ (zero coupon)​ that's priced at $ 199.67 to yield 8.22%.

The duration of this bond is (blank) years ?

A​ 24-year,7.49 % bond​ that's priced at $ 960.33 to yield 7.86%.

The duration of this bond is (blank) years ?

b. Find the duration of the whole bond portfolio if Elliot puts $ 250,000 into each of the 4 U.S. Treasury bonds.

The duration of this portfolio is (blank) years ?

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -