
Answer-first summary for fast verification
Answer: 4.40
The correct answer is **B (4.40)**. The portfolio's duration is calculated as the weighted average of the durations of the individual bonds, using their market values as weights. - **Calculation**: - Bond 1: ($120,000 / $300,000) * 5 = 0.4 * 5 = 2.00 - Bond 2: ($180,000 / $300,000) * 4 = 0.6 * 4 = 2.40 - **Total Duration**: 2.00 + 2.40 = 4.40 **Why not A or C?** - **A (4.33)**: Incorrect because it uses par value instead of market value for weighting. - **C (4.55)**: Incorrect because it weights the bonds by their durations, which is not the standard method for calculating portfolio duration.
Author: LeetQuiz Editorial Team
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