CFA Practice Question

There are 147 practice questions for this study session.

CFA Practice Question

An investor constructs a portfolio by investing 75% of her money into a 10-year bond, which has a key rate duration of 4.3, and 25% of her money into a 30-year bond, which has a key rate duration of 16.8. If the 10-year interest rate declines by 100 basis points, while the 30-year interest rate increases by 100 basis points, what will be the impact on the portfolio value?
A. The portfolio value will increase by 0.975%.
B. The portfolio value will decline by 0.975%.
C. The portfolio value will increase by 7.425%.
Explanation: %change in portfolio value = 0.75[(-4.3) (-0.01)] + 0.25[(-16.8)(0.01)] = -0.000975 or 0.975%.

User Contributed Comments 1

User Comment
JChewL2 remember to make key rate negative
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