Question
A manager of a $40 million dollar fixed-income portfolio with a duration of 4 wants to increase the duration to 7. The manager chooses a
A manager of a $40 million dollar fixed-income portfolio with a duration of 4 wants to increase the duration to 7. The manager chooses a swap with a semiannual reset period on the floating leg and a duration of 5 on the fixed leg. The manager should become a:
| A. | pay-floating counterparty in the swap with a notional principal of $26,666,667. | |
| B. | receive-floating counterparty in the swap with a notional principal of $26,666,667. | |
| C. | pay-floating counterparty in the swap with a notional principal of $ $25,263,158. | |
| D. | receive-floating counterparty in the swap with a notional principal of $15,238,095 |
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