To Create a Portfolio with a Duration of 4 Years

question 10

Multiple Choice

To create a portfolio with a duration of 4 years using a 5-year zero-coupon bond and a 3-year 8% annual coupon bond with a yield to maturity of 10%, one would have to invest ________ of the portfolio value in the zero-coupon bond.

• A) 50%
• B) 55%
• C) 60%
• D) 75%

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Definitions:

Voltage

The difference in electric potential between two points in a circuit, measured in volts.

RLC Parallel Circuit

An electrical circuit consisting of a resistor (R), inductor (L), and capacitor (C) connected in parallel, used to analyze resonance and filtering applications.

Currents

The flow of electric charge in a conductor, typically measured in amperes, representing the rate at which electric charge is flowing.

Power Factor

A measure of how effectively electrical power is converted into useful work output, representing the ratio of the real power flowing to the load to the apparent power in the circuit.