A company has a portfolio of bonds with a market value of $1,000,000 and an average duration of 5 years. Calculate the impact on the portfolio’s market value if interest rates increase by 1%. Discuss the significance of interest rate risk in financial management and investment decision-making. Analyze the potential factors that could influence changes in interest rates, such as economic conditions, monetary policy, and market expectations. Consider the implications of interest rate changes for the company’s investment portfolio, cost of borrowing, and overall financial performance. Discuss the strategic importance of managing interest rate risk, including using duration matching, interest rate swaps, and other hedging strategies. Explain how sensitivity analysis can be used to assess the impact of interest rate changes on the company’s financial position and performance. Discuss the limitations of sensitivity analysis and how it can be complemented with other risk management tools.