Rather than own a five-year bond and a fifteen-year bond, Financial Management

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Rather than own a five-year bond and a fifteen-year bond

Rather than own a five-year bond and a fifteen-year bond, suppose you sell both of them and invest in two ten-year bonds. Each has a coupon rate of 8 percent (semi-annual coupons) and has a yield to maturity of 9.20 percent. What is the value of your portfolio? What happens to the value of your portfolio if the yield to maturity on the bonds rises by one percentage point?

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Financial Management: Rather than own a five-year bond and a fifteen-year bond

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