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Portfolio immunization

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You're requested to invest USD 25,000,000 in a bond portfolio consisting of just two bonds. Bond X has a duration of 2.75 years, and bond Y has a duration of 6.25 years. The portfolio is to have an investment horizon of 5 years. How much of each bond issue should you purchase to immunize your portfolio?

Please provide methodology used and calculations in excel.

Thanks

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Solution Summary

The solution explains how to immunize a portfolio.

$2.19