Question 10 3 pts Suppose you are looking to put together a portfolio using 2 bo

Question

Question 10 3 pts Suppose you are looking to put together a portfolio using 2 bonds A and B. Bond A has a duration of 7.11 and bond B has a duration of 11.34. What is the weight you should put on bond B, if the goal is to achieve a portfolio duration 10? Round your answer to 3 decimal places. For example if your answer is 21.52%, then please write down 0.215 Hint: The weights put on bond A and B have to add up to 1, and the weighted average duration of bond A and B has to be 10. That should give you a system of two equations with two unkowns. The question asks for one of the two unkowns.

Explanation / Answer

x*11.34 + (1- x)*7.11 = 10

here X is the wight invested in bond B

X = 0.6832

amount to be invested in B = 0.683

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