Portfolio contains 12M of bonds. Concerned interest rates are likely to rise and has calculated that a 50bps increase would cause a 4% decline. What is the dollar duration? i keep getting 480000 (8*0.005*12M) but the answer is 960000 I guess i should be going 8*0.01*12M but i get that duration is 8 and then the change is 0.005 any ideas?
I am getting 480,000 …keeping in mind the dollar duration is an absolute value. I too would like to know how it is 960,000…is this the full question?
It is a measure of change in price per 100 bps change in yield. So, the answer is simply 12,000,000*.08