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    Key rate duration of portfolio

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    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

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    Solution Summary

    The key rate duration of portfolios are examined.