# Modifying Duration Calculations - shortcut i.e. 2016 am paper 8Aii

Say we shift 37.5 M in equity to cash, then the cash to bonds. We are modifying the bond portfolio duration downward simultaneously with an infusion of 37.5 M in cash. Instead of converting all cash to the current duration of the bond portfolio, then adjusting the duration down, we can just take the weighted average duration (in this case .5(0) + .5(6.05) = 3.025), then adjust the duration up to the target.

Anyone else use this method? I actually just brain farted and stumbled upon it, but the answer is spot on, and the logic seems correct? Thoughts?

I teach it all the time: when you’re changing both value and duration you’re simply changing the dollar duration. Start at the original dollar duration and move to the target dollar duration.

One step.

And for those of you who are worried if you’ll get full marks: fear not. I e-mailed CFA Institute last year and asked them if candidates would get full marks for doing it in one step. They assured me that they would.

The same applies to changing the value and beta of an equity portfolio: use beginning and ending _ dollar beta _ and you can do it in one step.

^ agree with S2000…I used this on level 3…it was too inefficient to do multistep for me. As a side-note…this means you are really grasping the material as you are beginning to realize these pathways.

Thanks Folks. Truly helpful!