Suppose the value of your bond portfolio is $500,000. It has a duration of 10.5 years....
Suppose the value of your bond portfolio is $500,000. It has a duration of 10.5 years. In 2 months, the interest rate increases by 0.33%. Estimate how much your bond portfolio will be worth in 2 months. (margin for error: +/- 500)
Homework Answers
Change in Price = -Mod.Duration(Change in Yield)
Change in Price = -10.5(0.0033)
Change in Price = -3.465%
Value of Bond Portfolio = (1 - 0.03465)(500,000)
Value of Bond Portfolio = $482,675
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