The situation
A fictional Indian bond desk holds ₹80 crore of short bonds with modified duration 2 and ₹20 crore of longer bonds with modified duration 7. The short yield rises 25 basis points. On the longer bonds, the benchmark rises 30 basis points and the credit spread widens 20. Ignore convexity.
1. Work out the numbers
How much does the longer-bond yield rise?
2. Make the decision
What is the approximate total loss?
Complete the calculation above to unlock this decision.