Bond A has a price of $97 635 and a duration of 1.93.Bond B has a price of $54 696 and has a duration of 3.46.Calculate the duration of a portfolio comprised of one of Bond A and one of Bond B.

Question

Quizplus · Accepted Answer

The duration of the portfolio is the market value weights of each bond F1F1F1S1F1F1F10 the duration of each bond.In this case,the market value of the bond portfolio is (97635 F1F1F1S1F1F1F10 1)+ (54696 F1F1F1S1F1F1F10 1)= $152331.The weight of the Bond A holding is 97635/152331 = 0.6409,and the weight of the Bond B holding is 54696/152331 = 0.3591.The duration of the portfolio is therefore 0.6409 F1F1F1S1F1F1F10 1.93 + 0.3591 F1F1F1S1F1F1F10 3.46 = 1.2369 +1.2425 = 2.4794.

Bond a Has a Price of $97 635 and a Duration