Answer:
duration of the portfolio 2.11
Step-by-step explanation:
We will do weighted-average
Bond A represent 300,000/1,000,000 = 3/10 and has a duraction of 2 years
so 3/10 x 2 = .6
Bond B represent 300,000/1,000,000 = 3/10 and has a duraction of 1.7 years
son 3/10 x 1.7 = 0.51
Bond C represent 400,000/1,000,000 = 4/10 and has a duraction of 2.5 years
so 4/10 x 2.5 = 1
now we add the weighted together: .6 + .51 + 1 = 2.11