You own a bond portfolio worth 88330you estimate that your


You own a bond portfolio worth $88,330.You estimate that your portfolio has an average yield-to-maturity of 5.1% and Macaulay Duration of 3.3 years. If interest rates went down one percentage point and your portfolio's yield-to-maturity changed by the same amount, what would be the new value of your bond portfolio?

(Hint: Covered in Chapter 7 slide 45.

Step? 1: Find the portfolio's Modified Duration (ModD) given its MacD and yield-to-maturity.

Step? 2: Compute the change in the portfolio's value using the equation on slide 45.

Step? 3: Compute the new value given original value and the change in value from Step 2).

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Financial Management: You own a bond portfolio worth 88330you estimate that your
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