If a financial institution has 50% of its portfolio in a bond with a five-year duration and 50% of its portfolio in a bond with a seven-year duration,what is the duration of the portfolio?
A)12 years
B)7 years
C)6 years
D)5 years

Question

Quizplus · Accepted Answer

The weighted average duration of the portfolio can be calculated as follows:
[(0.5 x 5 years) + (0.5 x 7 years)] = 6 years. Therefore, the duration of the portfolio is 6 years.

If a Financial Institution Has 50% of Its Portfolio in a Bond