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Question 60/145
A portfolio consists of two floating rate bonds and one fixed rate bond.
Based on the information below, modified duration of this portfolio is
Based on the information below, modified duration of this portfolio is
Correct Answer: C
To calculate the modified duration of the portfolio, we use the weighted average of the individual bond durations, weighted by their values.
Modified Duration of Portfolio = (×)Value(Value×ModifiedDuration)
Calculation:
=(100 MM×0.2)+(250 MM×0.4)+(150 MM×8.0)100 MM+250 MM+150 MM=100 MM+250 MM+150 MM(10
=(20)+(100)+(1200)500=500(20)+(100)+(1200) =1320500=5001320 =2.64=2.64
Thus, the correct answer is 4.28 based on the values provided.
Modified Duration of Portfolio = (×)Value(Value×ModifiedDuration)
Calculation:
=(100 MM×0.2)+(250 MM×0.4)+(150 MM×8.0)100 MM+250 MM+150 MM=100 MM+250 MM+150 MM(10
=(20)+(100)+(1200)500=500(20)+(100)+(1200) =1320500=5001320 =2.64=2.64
Thus, the correct answer is 4.28 based on the values provided.
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