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A portfolio manager expects interest rates to increase as a result of strength in the economy. The manager manages the portfolio on the basis of
A portfolio manager expects interest rates to increase as a result of strength in the economy. The manager manages the portfolio on the basis of duration.
(a) Based on this expectation for interest rates, should the manager increase or decrease duration?
(b) Will longer or shorter maturities be consistent with the decision summarized in (a)?
(c) Will higher or lower coupons be consistent with the decision summarized in (a)?
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