If you hold a bond portfolio with a modified duration of 8-years, how much would you...
| If you hold a bond portfolio with a modified duration of 8-years, how much would you expect (approximately) that portfolio to drop, if interest rates rose 1%. |
Homework Answers
Modified duration = 8 years
If the interest rates rose by 1%, then the portfolio value will drop by 8%.
Modified duration and the interest rates are inversely related to each other.
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