Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and a 10- year zero-coupon bond with a face value of $6,000….

Portfolio A consists of a one-year zero-coupon bond with a face value of $2,000 and a 10-

year zero-coupon bond with a face value of $6,000. Portfolio B consists of a 5.95-year zero-

coupon bond with a face value of $5,000. The current yield on all bonds is 10% per annum.

(a)

Show that both portfolios have the same duration.

(b)

Show that the percentage changes in the values of the two portfolios for a 0.1% per

annum increase in yields are the same.

(c)

What are the percentage changes in the values of the two portfolios for a 5% per

annum increase in yields?

Please show calculations, I am having difficulties comprehending these equations…

Zero coupon bond pays only one cash flow at the timeof maturity. Hence, their duration is equal to time tomaturity.GivenDuration of one year zero coupon bondwith face value of $2000 1 Duration…

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