Portfolio Value
QUESTION
Bond 1 has a price of 88.35 and a Macaulay duration of 12.7. Bond 2 has a price of 130.49 and has a duration of 14.6. A portfolio is created with a combination of face amount F1 from Bond 1 and F2 from Bond 2. F1 + F2 = 100, and the portfolio has a duration of 13.5. Find the portfolio value.
Bond 1 = 88.35 Macaulay duration of the bond 1 = 12.7 Bond 2 = 130.49 Macaulay duration of the bond 2 = 14.6 A portfolio is created with a combination of face amount F1 from Bond 1 and F2 from Bond 2. F1 F2 = 100 Portfolio duration = 13.5 Value of the Portfolio =? Total Value of the Portfolio = [Bond 1 Bond 2] Total Value of the
olio = [88.35 130.49] Total Value of the Portfolio = 218.84 Calculating Portfolio duration: Portfolio duration = [(88.35 / 218.84) * 12.7] [(130.49 / 218.84) * 14.6] Portfolio duration = 5.127 8.705 Portfolio duration = 13.8
ANSWER:
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