If : Par Value Security Market Value Current Price Price If Yield Change Down 100 Up 100 bp $25,000,000 4.75% due 2010 $25,857,300 $105.96 $110.65 $101.11 $40,000,000 5.85% due 2025 $39,450,000 $98.38 $102.76 $93.53 $65,000,000 Bond portfolio $65,307,300 Looking for the quick formulas to solve these questions : 1. Assume that the effective convexity of the 4.75% 2010 bond is 3.45. The effective duration of the 4.75% 2010 bond and the percentage change in the price of the bond for an 80 basis point decrease in the yield are closest to: Effective Duration % Change in Bond Price A) 4.21 +2.09% B) 4.50 +3.62% C) 4.58 +1.79% Your answer: B was correct! 2. Assume that the duration of the 5.85% 2025 bond is 2.88. The duration of the portfolio is closest to: A) 3.01. B) 3.12. C) 3.52. Your answer: C was correct! 3. The portfolio convexity adjustment, assuming a 100 basis point decrease in yield, is closest to: A) +1.77%. B) −1.77%. C) −2.93%. Your answer: B was incorrect. The correct answer was A) +1.77%.