Consider the following three bond portfolio:

Bond Price Coupon Weight Duration Maturity

A 100.6555 3.25% 0.489 1.886 2 year

B 100.5119 4.875% 0.394 7.518 10 year

C 60.1730 0% 0.117 9.421 10year

a. Compute the portfolio duration.

b. Compute the contribution to portfolio duration of each bond.

c. Suppose interest rates change by 50 basis points, what is the approximate percentage change in the portfolios value?

d. What assumption does one making in answering question c?