8. A bond portfolio has a market value of $5,225,000. Its duration is 6.74. If the average yield on the bond portfolio i...
8. A bond portfolio has a market value of $5,225,000. Its duration is 6.74. If the average yield on the bond portfolio increases from 5.85% to 6.20%, what is the estimated effect on the value of the portfolio?
Homework Answers
Increase in yield = 6.2%-5.85% = 0.35%
% Decrease in value = Increase in yield * Duration
= 0.35%*6.74
= 2.359%
Hence decrease in value of the portfolio = 5225000*2.359% = 123257.75
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