The Modified Duration of a Bond Portfolio Worth $1 Million

question 20

Multiple Choice

The modified duration of a bond portfolio worth $1 million is 5 years.By approximately how much does the value of the portfolio change if all yields increase by 5 basis points?

• A) Increase of $2,500
• B) Decrease of $2,500
• C) Increase of $25,000
• D) Decrease of $25,000

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Definitions:

Profit Margin

A financial metric used to evaluate a company's financial health by dividing net income by net sales, expressed as a percentage.

Direct Expenses

Expenses that can be directly attributed to a specific cost object, such as a product, department, or project.

Service Accounting System

An accounting system designed to deal with financial transactions and record-keeping in service-oriented businesses.

Departmental Accounting System

An accounting method used to separately track the performance and financial records of different departments within a company.