Assume you have a portfolio made of 50 Bond A and 25 Bond B.

Bond A:

2 years to maturity

YTM = 5%

Face Value: $1,000

Coupon Rate: 6%

Coupons paid semi annually.

Bond B:

4 years to maturity

YTM = 5.8%

Face Value = $1,000

Does not pay coupons.

a) What is the market value (MV) of the portfolio?

b) What is the duration of ea. Bond A?

c) What is the duration of ea. Bond B?

d) If the interest rate (all YTM's) decrease by 0.7% over the next hour, use the duration of both bonds to approximate the % change of your portfolio.

Please use continuous compounding. Thanks! Will thumbs up ASAP.