Assume that you hold a portfolio of bonds as follows:

$4,000,000 of 5-year bonds with a duration of 3.861 priced at 100 (par)
$5,000,000 par value of 10-year bonds with a duration of 8.047 priced at 84.6275
$1,000,000 par value of 30-year bonds with a duration of 9.168 priced at 137.8586

The duration of this portfolio is 6.4655, which is the weighted average duration of the component bonds. Assume that the yield for each of these bonds decreases by 10 basis points. Estimate the new market value for the portfolio.

Explanation: Duration may be used to estimate the change in market value for every 100 basis point change in yield. Since the yields in this case go down by 10 basis points, we know that the market value of the portfolio must increase by approximately .64655%.