Since there was an errata about this in CFAI text I wanted to make sure I understand: Avg Portfolio duration - calculated using portfolio weights times the effective duration Portfolio dollar duration - calculated as a sum … ? but in the problem that I did the formula was 0.01 / 2 (Eff. Duration*MV of bond(1) + Eff. Duration * MV of bond(2)) why are they deviding the 0.01 by 2??? I know that the 0.01 is the 100 basis point change but why devide that by 2? Is it because there are 2 bonds in the portfolio? I just want to make sure I have it nailed. …
Portfolio duration is calculated using avg. weights and Portfolio Dollar Duration is calculated by individually calculating the dollar duration of each component and then summing them up. Don’t know what example you’re referring to… would need to see the actual question.
No 2 involved…just take the sum of the individual dollar durations.
that’s what I thought, and I got it wrong. it was at the Boston society mock the PM. I can’t post the actual question but maybe someone took it too? i think that Schweser had the very similar question in session 8 that also divided by 2. Dongjohnson, MPT are you guys around? You have Schweser…
That could be if they were both basing the quesion on how the CFAI texts had it until the released the Errata. Stalla had problems that were done using Average vs sum, but when CFAI released the Errata they released their Errata and new pages for the Study guides for that section! So Stalla, schweser, BSAS all took what the CFAI stated and reprinted it without giving it much thought…so I wouldnt worry about it.
actually that question on BSAS had both answers one for using a sum and another for using average I agree with bigwilly, sum is the way to go, and BSAS didn’t bother to check errata and correct their exam, there were other mistakes with BSAS, like one question without a right answer, and a duplicate question, so I would just ignore this question, and for the exam just remember that dollar duration is just a sum
hey thanks Volkovv!!! I guess I assumed that BSAS exam would have corrected the errata - so I got that question right! Yey!!! hey volkovv if you have the exam with you look at question 25 - their formula is right but I think that the answer should be sell 26 contracts instead of sell 40 contracts! they calculated it wrong… what do you think?
It’s interesting that Schweser got it right (DD of portfolio) but CFAI did not. That’s one curious detail.
yeah, that the question I was talking about where no right answer was listed I bilieve the right answer would be 26.67 and rounded it would be sell 27 contracts I spoke to the instructor during the test and he aknowledged the mistake