Please correct answer and don't use hand rating Problem 3: The duration of a portfolio of bonds is just the weighted average of the durations of thebonds in the portfolio, where the weight on a particular bond is the fraction of the value of the portfoliothat comes from that particular bond; the weight sum to 1. Consider the following information on 4bonds:Bond1Duration226101534Consider the following three portfolios (the portfolios differ by the amount of current value in eachbond); the data below shows the current values in each of the bonds for each of the portfolios.PortfolioABCCurrent values in each bondBond 1$1MBond 2$1MBond 3Bond 4$1M$1M$2M00$2M0$1.75M2.25M0Which of these three portfolios has the most interest rate risk?

Portfolio A:Weighted average duration = (1M * 2 + 1M * 6 + 1M * 10 + 1M * 15) / (1M + 1M + 1M + 1M)…

Answered: Problem 3: The duration of a portfolio…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 21P

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