In #5, it gives the country beta for a foreign country as 0.75, and attributed “a duration of 12 years to [the foreign] bond with a duration of 9 years.” The question is if the statement is correct in regard to the duration attributed to the bond.
The answer key says duration attributed to the bond is 6.75? Since it’s “equal to the −Duration × Country beta × Change in domestic yield, thus the duration attributed to the ZAR bond in the USD portfolio is Duration × Country beta, or 9 × 0.75 = 6.75.”
Shouldn’t it be 12 x 0.75 = 9, or am I missing something?