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10. Your professor owns an unusual por Tessor owns an unusual portfolio of investments, put together intentionally as a test

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As it was worked out below, market value of the portfolio was calculated assuming effective interest rate of 6%. Market Value of first instrument is 50,000; second instrument is 50,000 & the third instrument is 100,000. Therefore, total market value is 200,000. Individual Macaulay duration was calculated for the three separately as 5.02, 12 & 4.88. Macaulay duration for the portfolio is calculated by taking market value weighted average of duration for individual instruments & divided by the total market value of the portfolio.

For effective interest rate of 6.5%, individual market value for instruments was computed separately as 48,836.60; 47,254.71 & 97,773.11 respectively. Therefore, total market value = 193,864.42.

O 6,793.4 ; Market value os no 10 years r.6% No future payments, hence M.O. the entire force - 251,100 25.02. SD.000 3 zew Co

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