Portfolio Assignment | Professional Writing

What is the duration of the portfolio outlined below? First, calculate the weighting (proportion) of each position by dividing the market value of each bond by the total value of the portfolio. Next, multiply the duration of each bond by its weighting, then add the weighted duration of each bond together to get the weighted average duration of the portfolio. Bond W: $13 million, 2-year duration Bond X: $27 million, 7-year duration Bond Y: $60 million, 8-year duration Bond Z: $40 million, 14-year duration Assuming a portfolio duration of 10 years, if market interest rates fall by 50 basis points (0.5%), what is the approximate percentage change you expect in the value of the portfolio? If the market value of the portfolio is $1,000,000 how much money would the portfolio lose if rates increase by 100 basis points (1.0%)?

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The expected percent change if rates fall by 0.50% is: Choose… For a portfolio worth $1,000,000, the expected money lost if rates increase by 1% is: Choose… – 14a. Calculate the estimated price of a bond with the following characteristics, assuming interest rates increase by 1.25%: • Current price = 89.125 • Credit rating = BB • Duration = 7 years • Convexity measure = 60 % Price change due to duration = -maturation x yield change % Price change due to convexity = 1/2 x convexity measure x yield change 2 14b. How important is the credit rating to this calculation? Select one or more: O a. 81.744 O O b. 80.909 c. 97.34121 O d. Low rated bonds are more sensitive to changing market yields than high rated bonds e. Low rated bonds are less sensitive to changing market yields than high rated bonds f. Credit rating has no impact on the estimated price change for a given change in market yields o

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