Assume that the yield curve for the data of Problem 3 is 10%. Further assume that the

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Assume that the yield curve for the data of Problem 3 is 10%. Further assume that the three bonds are of equal value and the only bonds existing. Set up a single-index representation of their covariance. What is the covariance between all pairs of bonds?
In Problem 3
Bond ... Duration (years)
A ...... 5
B...... 10
C...... 12
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Modern Portfolio Theory and Investment Analysis

ISBN: 978-1118469941

9th edition

Authors: Edwin Elton, Martin Gruber, Stephen Brown, William Goetzmann

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