What is the current value and modified duration

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Problem: You are a fixed-income portfolio manager, and you have a very simple portfolio consisting of 5-year U.S. Treasury strips (zero coupon bonds) with a total face value of $250 million. The 5-year zero-coupon interest rate is 1.5% per year, compounded twice per year.

a) What is the current value and modified duration of your bond portfolio?

There are also ten-year Treasury notes (coupon bearing bonds) available on the market. You have calculated that their modified duration is 7.75 and that for each $1 of face value, their market value is $1.12

b) If the yield on these coupon bonds decreases by 1 basis point, what would the percentage change of the market price of the bond?

Reference no: EM133039594

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