A portfolio manager owns $25 million par value of bond ABC. The bond is trading at 80 and has a modified duration of 7.5. The portfolio manager is considering swapping out of bond ABC and into bond XYZ. The price of this bond is 85 and it has a modified 9 duration of 5.5. 0 (a) What is the dollar duration per $100 par value of bond ABC per 100-basis-point change in yield? What is the dollar duration per $100 par value of bond XYZ per 100- 1 basis-point change in yield? 2 3 4 (b) What is the dollar duration for the $25 million position of bond ABC? 6 7 (c) How much in market value of bond XYZ should be purchased so that the dollar duration of bond XYZ will be approximately the same as that for bond ABC? 8 9 (d) How much in par value of bond XYZ should be purchased so that the dollar duration of bond XYZ will be approximately the same as that for bond ABC? 2 A portfolio manager owns $25 million par value of bond ABC. The bond is trading at 80 and has a modified duration of 7.5. The portfolio manager is considering swapping out of bond ABC and into bond XYZ. The price of this bond is 85 and it has a modified 9 duration of 5.5. 0 (a) What is the dollar duration per $100 par value of bond ABC per 100-basis-point change in yield? What is the dollar duration per $100 par value of bond XYZ per 100- 1 basis-point change in yield? 2 3 4 (b) What is the dollar duration for the $25 million position of bond ABC? 6 7 (c) How much in market value of bond XYZ should be purchased so that the dollar duration of bond XYZ will be approximately the same as that for bond ABC? 8 9 (d) How much in par value of bond XYZ should be purchased so that the dollar duration of bond XYZ will be approximately the same as that for bond ABC? 2