Question
Consider the following three bond portfolio: Bond Price Coupon Maturity Mod Dur Market Weight A 100.6555 3.25% 2 years 1.886 0.489 B 100.5119 4.875% 10
Consider the following three bond portfolio:
| Bond | Price | Coupon | Maturity | Mod Dur | Market Weight |
| A | 100.6555 | 3.25% | 2 years | 1.886 | 0.489 |
| B | 100.5119 | 4.875% | 10 years | 7.518 | 0.394 |
| C | 60.1730 | 0% | 10 years | 9.421 | 0.117 |
a. Compute the portfolios modified duration.
b. Suppose interest rates change by 50 basis points, what is the approximate percentage change in the portfolios value?
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Public Finance In Canada
Authors: Harvey S. Rosen, Ted Gayer, Jean-Francois Wen, Tracy Snoddon
5th Canadian Edition
1259030776, 978-1259030772
