14.3 Suppose that the value of a portfolio increases by $50,000

for each one-basis-point increase in the 12-year rate and has no other sensitivities. The multiple-vertex approach is used to model with the following vertices: 3 months, 6 months, 1 year, 2 years, 3 years, 5 years, 10 years, 15 years, 20 years, and 30 years. What is the sensitivity of the portfolio to a one-basis-point increase in each vertex of the term structure?

Answer: The 10-year vertex has a sensitivity of $30,000 because a one-basis-point increase in that rate leads to an increase of 0.6 basis points in the 12-year rate. Similarly, the 15-year vertex has a sensitivity of $20,000. The other vertices have no sensitivity.