Weighted Market Portfolio Mod. Mod. Value Weight Duration Duration Bond A Coupon Rate 2.00% 3.00% Par Price Maturity Amount (% of (years) Owned par) 2 $200,000 100.00 5 $200,000 100.00 10 $300,000 100.00 30 $300,000 100.00 B 4.00% D 5.00% Initial Portfolio Totals Consider a bond portfolio manager who owns the four bonds described above. a) How much is the portfolio worth? b) What is the modified duration of the manager's portfolio? c) Suppose all bond yields fall by 50 basis points (i.e., -0.50%). What would you forecast to be the change in the portfolio's value? d) Suppose the manager sells $100,000 in market value of the 30-year to buy the same amount of the 2-year bond (a "switch trade). What happens to the modified duration of the manager's portfolio? What would you forecast to be the change in this new portfolio's value for a 25- basis point rise (i.e., +0.25%) in all yields