Your portfolio is 30% in money market funds (with a duration of zero) and 70% in a 12-year maturity bond (with a modified duration of 10 years). You frequently rebalance your portfolio to maintain a constant portfolio-level duration. The yield on the whole portfolio is 5% today. What will your portfolio's approximate return be this coming next year in the scenario that on the last day of this coming year your portfolio yield falls to 4%

Answer rating: 100% (QA)

To calculate the approximate return of the portfolio for the coming year we can use the concept of d... View the full answer