Next are two portfolios with a market value of $500 million. The bonds in both portfolios are
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Next are two portfolios with a market value of $500 million. The bonds in both portfolios are trading at par value. The dollar duration of the two portfolios is the same.
a. Which portfolio can be characterized as a bullet portfolio?
b. Which portfolio can be characterized as a barbell portfolio?
c. The two portfolios have the same dollar duration; explain whether their perfor- mance will be the same if interest rates change.
d. If they will not perform the same, how would you go about determining which would perform best assuming that you have a six-month investment horizon?AppendixLO1
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