Question: Consider two bonds, both pay annual interest. Bond C has a coupon of 6% per year, maturity of 5 years, yield to maturity of 6%

Consider two bonds, both pay annual interest.

Bond C has a coupon of 6% per year, maturity of 5 years, yield to maturity of 6% per year, and a face value of $1000.

Bond D has a coupon of 8% per year, maturity of 15 years, yield to maturity of 6% per year, and a face value of $1000.

a. Calculate the modified duration in years for bond C. (Easier if you use excel, make sure to upload the completed excel file)

b. Calculate the modified duration in years for bond D. (Easier if you use excel, make sure to upload the completed excel file)

c. Assume that I want to construct a bond portfolio with an average modified duration of 6 years using only Bond C and Bond D. Using the modified durations that you previously calculated, indicate the proportions invested in each bond to reach this goal. (Make sure to show me your calculations)

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