Use semiannual compounding frequency. It will be the best practice if you check your answers by two methods.

Questions:

(a) Calculate yields and durations for all bonds (6 points) (b) Calculate the yield of the portfolio (5 points)

(c) Calculate the duration of the portfolio (5 points)

0. Consider a following portfolio:

   1. (a) Bond A: Zero coupon bond with maturity of T1 = 3 years, face value M1 = 2000 and priced at 1720.

   2. (b) Bond B: Semiannual coupon bond, coupon rate c = 5% (per year), maturity T2 = 2, face value M2 = 5000 and priced at 4899.

   3. (c) Bond C: Semiannual coupon bond , coupon rate c = 6% per year, maturity T = 2.5 and face value M3 = 3000 and priced at 2930.