chris renburg owns the following portfolio of option-free bonds: par value full price duration $3,000,000 $2,400,000 4.625 $3,500,000 $3,600,000 7.322 $1,500,000 $1,200,000 9.300 $8,000,000 $7,200,000 the duration of renburg's bond portfolio is closest to:

Bond duration is a measure of how much bond prices are anticipated to fluctuate if and when interest rates change. Bond duration, in more technical words, is a measure of interest rate risk. Understanding bond length can assist investors in determining how bonds fit into a larger investment portfolio.

To arrive at the above solution, we must find the percentage of each portfolio against the total investment at Full Price. This will be multiplied against each duration. The results will be summed up to give us the total duration of the portfolio.

That is:

Par value Full price Percentage Duration Portfolio Duration

$3,000,000 $2,400,000 0.3333 4.625 1.5415

$3,500,000 $3,600,000 0.5 7.322 3.661

$1.500,000 $1.200.000 0.1667 9.300 1.55031

$8,000,000 $7,200,000 6.75%

Hence the portfolio duration is [tex]\approx[/tex] 6.8%

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Full Question:

Chris Rensburg owns the following portfolio of option-free bonds:

Par value Full price Duration

$3,000,000 $2,400,000 4.625

$3,500,000 $3,600,000 7.322

$1.500,000 $1.200.000 9.300

$8,000,000 $7,200,000

The duration of Rensburg's bond portfolio is closest to:

A) 6.6.

B) 6.8.

C) 7.0.