A bond portfolio has a current market value of $500,000,000. The average portfolio duration is 5 years. Current rates are 4%. Rates are expected to fall 0.5% over the next 12 months. Use the duration value to estimate the expected change in market value of the portfolio over the next 12 months. Estimate annual compounding.

You own a 8-year zero coupon bond. The market rate is currently 6.2%, but it is forecast to fall to 5.2%. Estimate the percentage price change that you expect for the bond that you hold.

Answer rating: 100% (QA)

Estimating the expected change in market value of a bond portfolio Duration is a measure of the sensitivity of a bond portfolio to changes in interest ... View the full answer