20. Assume there are two bonds in a bond portfolio. Bond 1 has a price of P, a Macaulay duration of MacD₁, a dollar duration of SD and a modified duration of ModD, and a weight of w, in the portfolio. Bond 2 has a price of P₂, a Macaulay duration of MacD₂, a dollar duration of SD, and a modified duration of ModD₂ and a weight of w, in the portfolio. Assuming the yield curve is flat, and that the portfolio has a Macaulay duration of MacD Portfolio a dollar duration of SD Portfolio and a modified duration of ModD Portfolio Which of the following statements is incorrect? A. MacD Portfolio =W₁MacD₁ + w₂MacD₂ B. ModD Portfolio=W₁ModD₂ +w₂ModD₂ C. SD Portfolio =W₁SD + ₂ SD₂ D. ModD Portfolio $D₂ + $D₂ R+ P₂ dPdP₂ dy dy P+P₂ E. ModD Portfolio=
20. Assume there are two bonds in a bond portfolio. Bond 1 has a price of P, a Macaulay duration of MacD₁, a dollar duration of SD and a modified duration of ModD, and a weight of w, in the portfolio. Bond 2 has a price of P₂, a Macaulay duration of MacD₂, a dollar duration of SD, and a modified duration of ModD₂ and a weight of w, in the portfolio. Assuming the yield curve is flat, and that the portfolio has a Macaulay duration of MacD Portfolio a dollar duration of SD Portfolio and a modified duration of ModD Portfolio Which of the following statements is incorrect? A. MacD Portfolio =W₁MacD₁ + w₂MacD₂ B. ModD Portfolio=W₁ModD₂ +w₂ModD₂ C. SD Portfolio =W₁SD + ₂ SD₂ D. ModD Portfolio $D₂ + $D₂ R+ P₂ dPdP₂ dy dy P+P₂ E. ModD Portfolio=
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:20. Assume there are two bonds in a bond portfolio. Bond 1 has a price of R₁, a Macaulay
duration of MacD₁, a dollar duration of SD, and a modified duration of ModD, and a weight
of w, in the portfolio. Bond 2 has a price of P₂, a Macaulay duration of MacD₂, a dollar
duration of SD₂ and a modified duration of ModD, and a weight of w, in the portfolio.
Assuming the yield curve is flat, and that the portfolio has a Macaulay duration of MacD Portfolio
a dollar duration of SD Porfolio and a modified duration of ModD which of the following
statements is incorrect?
A. MacD Portfolio =W₁MacD₁+w₂MacD₂
B. ModD Portfolio = W₂ModD₂ +w₂ModD₂
C. SD Portfolio = ₁ SD + ₂D₂
$D₂ + $D₂
D. ModDp
R₁ + P₂
dP dP₂
+
dy
dy
Portfolio
E. ModD Portfolio
=
=
P₁+P₂
Portfolio
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