subject: fixed investment income

Consider the following portfolio:

Bond	Market Value (RM)	Duration (years)
A	15 million	3
B	22 million	5
C	71 million	10
D	32 milion	12

(a) Calculate the portfolios duration. (6 marks)

(b) If interest rates for all maturities change by 50 basis points, calculate the approximate percentage change in the value of the portfolio. (4 marks)

(c) Tabulate the contribution to portfolio duration for each bond. (5 marks)

(d) If two portfolios have the same duration, the change in their value when interest rates change will be the same. Explain why you agree or disagree with this statement. (5 marks)

(e) For a corporate bond that has a low credit rating, justify why might an analytical duration be limited as a measure of interest-rate risk. (5 marks)