Question
Portfolio Rebalancing based on the dollar duration. Bond Coupon Maturity Price/Value YTM Duration Dollar Duration Bond X 3.00% 2 $ 1,000,000 3.00% 1.93 Bond Y
Portfolio Rebalancing based on the dollar duration.
| Bond | Coupon | Maturity | Price/Value | YTM | Duration | Dollar Duration |
| Bond X | 3.00% | 2 | $ 1,000,000 | 3.00% | 1.93 |
|
| Bond Y | 4.00% | 5 | $ 1,000,000 | 4.00% | 4.49 |
|
| Bond Z | 5.00% | 10 | $ 1,000,000 | 5.00% | 7.79 |
|
| $ 3,000,000 |
|
a) What is the bond portfolios duration?
b) A bond portfolios dollar duration is equal to the sum of the dollar durations of each bond. (Dollar duration for a bond = bond value X duration X 1.00%). What is the bond portfolios initial dollar duration?
Please Show Work and Explain!
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Financial Markets Instruments And Institutions
Authors: Anthony M. Santomero, David Babbel
2nd Edition
0072358688, 9780072358681
