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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.

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