Question: Assume You have two bonds with the following data: Current MV of the first is 100$ Yield 2% maturing in 2 years Current MV of

  1. Assume You have two bonds with the following data:

    Current MV of the first is 100$ Yield 2% maturing in 2 years

    Current MV of the first is 150$ Yield 3% Maturing in 3 years

    Assuming a continuous model what will be the returns of this portfolio if the first yield will rise by 50 bps ( new Yield is 2.5%) and the second yield rises by 1% ( new Yield is 4%)

    Hint: Calc the returns of the bond seperately and then do weighted average

    -1.9%

    -2.18%

    -2.6%

    NONE OF THE ABOVE

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