Assume a portfolio manager has a long position in two fixed income securities as follows:

• Bond A: 8-year, 8 per cent annual coupon bond at a yield to maturity of 7 per cent.
• Bond B: 8 year, 9 per cent annual coupon bond at a yield to maturity of 10 per cent.

The two bonds were issued five years ago.

The current price of Bond B is equal to R, hence it sells at a.The duration of Bond B is equal to. Assuming a 90bp shock (decrease) in yield the duration rule approximates a priceof%. When yields decrease by 90bp the duration rule approximates the price of this bond to increase by R.