Explore BrainMass

Key rate duration of portfolio

1a- A bond portfolio consists of the following debt securities:
Bond 1: 3-year, zero-coupon note; $1,200,000 holdings
Bond 2: 7-year, zero-coupon note; $1,500,000 holdings
Bond 3: 10-year, zero-coupon note; $1,650,000 holdings
Bond 4: 25-year, zero-coupon bond; $1,000,000 holdings

The key rate duration of the portfolio is closest to
a. 10.22
b. 10.39
c. 11.15
d. 11.25

1b-The portfolio in Question 1a, most closely resembles a
a. Ladder portfolio
b. Barbell portfolio
c. Bullet portfolio
d. Structured portfolio

2a.The modified duration for a 2-year Treasury note with a 6 percent coupon and selling for 107-5/8 is closest to
a. 1.89
b. 1.92
c. 2.00
d. 3.84

2b.If the Macaulay duration of a bond is 7, the convexity is 36, and the YTM is 5.2 percent the total percentage change in price to a 165 basis points decrease in market interest rates is closest to
a.? -12.22
b. -10.26
c. 10.26
d. 12.22

2c. Pension funds generally adhere most closely to
a. The pure expectations theory
b. The preferred habitat theory
c. The market segmentation theory
d. The liquidity theory

Solution Summary

The key rate duration of portfolios are examined.