Mr. Spice wonders how a fixed-income manager could position his portfolio to capitalize on the expectation of an upward-shifting and twisting term structure. For the twist, interest rates on long-term bonds increase by more than those on shorter-term notes.
a. Sell bonds and buy notes.
b. Buy bonds and sell notes.
c. Buy both bonds and notes.

Frank Myers, CFA, is a fixed-income portfolio manager for a large pension fund. A member of the Investment Committee, Fred Spice, is very interested in learning about the management of fixed income portfolios. Mr. Spice has approached Mr. Myers with several questions.
Mr. Myers has decided to illustrate fixed-income trading strategies using a fixed-rate bond and note. Both bonds have semiannual coupons. Unless otherwise stated, all interest rate changes are parallel. The characteristics of these securities are shown in the table below.

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Fixed-Rate Note Fixed-Rate Bond 107.18 Price 100.00 Yield to maturity 5.00% 5.00% Periods to maturity 18 8. 3.5851 Modified duration 6.9848