What Is the Dollar Duration of the Following Portfolio

question 14

Essay

What is the dollar duration of the following portfolio?
i. Long a 1.5-year zero coupon bond.
ii. Short a 2-year ?xed coupon bond paying 1% quarterly.

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Definitions:

Uncertainty

A state where the outcome of an event is unknown or unpredictable, often leading to ambiguity or lack of clarity.

Classical Decision Model

A theoretical model suggesting that decision-making is a rational process where the best choice is made based on a thorough analysis of alternatives and their outcomes.

Complete Information

Having all necessary and relevant data available to make informed decisions or to fully understand a situation.

Clearly Defined Problem

A problem that has been thoroughly understood and articulated, including its scope and boundaries.