PPT Slide

Bond Market value Portfolio weight Duration

A $10 million 0.10 4

B $40 million 0.40 7

C $30 million 0.30 6

D $20 million 0.20 2

Portfolio duration = 0.1? 4 + 0.4 ? 7 + 0.3 ? 6 + 0.2 ? 2

= 5.4.

Roughly speaking, if all the yields affecting the four bonds change by 100 basis points, the portfolio value will change by approximately 5.4%.