An investment fund owns the following portfolio of three fixed-rate government bonds: The total market value of
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An investment fund owns the following portfolio of three fixed-rate government bonds:
The total market value of the portfolio is EUR96,437,017. Each bond is on a coupon date so that there is no accrued interest. The market values are the full prices given the par value. Coupons are paid semiannually. The yields-to-maturity are stated on a semiannual bond basis, meaning an annual rate for a periodicity of 2. The Macaulay durations are annualized.
Calculate the average (annual) modified duration for the portfolio using the shares of market value as the weights.
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