A bond dealer provides the following selected information on a portfolio of fixed-income securities. Par Value Market Price Coupon Modified Duration Effective Duration Effective Convexity $2 million 100 6.5% 8 8 154 $3 million 93 5.5% 6 1 50 $1 million 95 7.0% 8.5 8.5 130 $4 million 103 8.0% 9 5 -70 1. What is the effective duration for the portfolio? 2. Calculate the price value of a basis point for this portfolio. 3. Which bond(s) likely has (have) no embedded options? Explain your rationale. 4. Which bond(s) is (are) likely callable? Explain your rationale. 5. Which bond(s) is (are) likely putable? Explain your rationale. 6. What is the approximate price change for the 7% bond if its yield to maturity increases by 25 basis points? 7. Why might two bond dealers differ in their estimates of a portfolio's effective duration? 8. Why might portfolio effective duration be an inadequate measure of interest rate risk for a bond portfolio even if we assume the bond effective durations are correct