1. Consider a portfolio that consists of 200 units of Bond A, 150 units of Bond B, and 250 units of Bond C. All bonds pay annual coupons. The attributes of the bonds are:

Bond Face Value Maturity Coupon Rate Price

A $1000 3 4% $990

B $1000 8 6% $1000

C $1000 5 5% $1010

Part A. Compute the modified duration and convexity measures for each bond (report 4 decimal places):

Bond Duration Convexity

A

B

C

Part B. Compute the portfolio weights.

Part C. Compute the portfolio duration and convexity measures.

Part D. Using your answer in the previous part, approximate the value of the portfolio if the yield increases 100 basis points.