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If the effective duration of a $455.4 million portfolio of bonds is 10 and its approximate convexity is 250, in dollars terms, how much will the portfolio change in value if interest rates increase 200bps from 7% to 9%? (Hint: use both duration and convexity to estimate the change in the value of the portfolio, pick the closest answer)

If the effective duration of a $455.4 million portfolio of bonds is 10 and its approximate convexity is 250, in dollars terms, how much will the portfolio change in value if interest rates increase 200bps from 7% to 9%? (Hint: use both duration and convexity to estimate the change in the value of the portfolio, pick the closest answer)

Essentials Of Investments
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
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If the effective duration of a $455.4 million portfolio of bonds is 10 and its approximate convexity is 250, in dollars terms, how much will the portfolio change in value if interest rates increase 200bps from 7% to 9%? (Hint: use both duration and convexity to estimate the change in the value of the portfolio, pick the closest answer) Group of answer choices +$70 million +$45 million -$70 million +$140 million
Transcribed Image Text:If the effective duration of a $455.4 million portfolio of bonds is 10 and its approximate convexity is 250, in dollars terms, how much will the portfolio change in value if interest rates increase 200bps from 7% to 9%? (Hint: use both duration and convexity to estimate the change in the value of the portfolio, pick the closest answer) Group of answer choices +$70 million +$45 million -$70 million +$140 million
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