The duration of a portfolio of bonds can be calculated as ________.
A) the coupon weighted average of the durations of the individual bonds in the portfolio
B) the yield weighted average of the durations of the individual bonds in the portfolio
C) the value weighted average of the durations of the individual bonds in the portfolio
D) averages of the durations of the longest- and shortest-duration bonds in the portfolio

Question

Quizplus · Accepted Answer

The duration of a portfolio of bonds is calculated as the value weighted average of the durations of the individual bonds in the portfolio. This approach accounts for the proportion of each bond's market value relative to the total portfolio value, providing a more accurate measure of the portfolio's overall sensitivity to interest rate changes.

The Duration of a Portfolio of Bonds Can Be Calculated