Assignment:
Q1. What are the limitations of using duration as a measure of a bond’s price sensitivity to interest-rate changes?
Q2. Consider the following portfolio:
Bond Market Value Duration
W $13 million 2
X $25 million 7
Y $60million 8
Z $40 million 14
a. What is the portfolio’s duration?
b. If interest rates for all maturities change by 50 basis points, what is the approximate percentage change in the value of the portfolio?
c. What is the contribution to portfolio duration for each bond?
Your answer must be, typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format and also include references.