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Business, 21.04.2020 16:36 torrencek1

An investor wants to put together a portfolio consisting of up to 6 different bonds. To minimize risk of loss of principal value due to interest rate fluctuations and to assure enough cash flow at a certain point in the future, she wants to make sure the average duration (Note: use DURATION formula to calculate duration of each bond.) of the bonds equals her investment time horizon. How should the investor choose her portfolio to optimize the combined yield of the bonds, while making sure the duration of the portfolio equals the investment time horizon

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