CFA Practice Question

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CFA Practice Question

A portfolio consists of two bonds:

Bond | Maturity | Coupon | Duration | Proportion in Portfolio
Bond A | 10 years | 8% | 6.7 | 60%
Bond B | 7 years | 5.2% | 3.9 | 40%

If the yield on Bond A increases by 54 basis points and the yield on Bond B decreases by 79 basis points, compute the percentage change in portfolio value.
A. -3.404%
B. -0.938%
C. 3.404%
Explanation: Percentage change in portfolio = wA DA (ΔrA) + wB DB (ΔrB)= 0.6 * (-6.7) * (0.0054) + 0.4 * (-3.9) * (-0.0079) = -0.938%

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