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What is the approximate percent change in value of your portfolio if all (annual) interest rates...

What is the approximate percent change in value of your portfolio if all (annual) interest rates go down by two percentage points?

What is the approximate change in dollar value of your portfolio if all (annual) interest rates go down by two percentage points? Your portfolio consists of one of each bond

Bond A: Coupon rate = 10%, Maturity = 2, Price = 109.40, Duration = 1.82, Convexity = 4.34

Bond B: Coupon rate = 5%, Maturity = 5, Price = 100, Duration = 4.38, Convexity = 22.61

Bond C: Coupon rate = 3%, Maturity = 10, Price = 84.81, Duration = 8.36, Convexity = 81.24

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Answer #1

The approximate percent change in value of your portfolio can be calculated using bond durations as shown below:

So the portfolio value will increase by approximately 9.15%

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