Question
Look at the bonds below and use the information to answer the next two questions. 1) You presently own bond C. You expect yield is
Look at the bonds below and use the information to answer the next two questions.
1) You presently own bond C. You expect yield is going to fall. Which strategy will best take advantage if your belief yield is going to rise?
Sell bond C and buy bond B
Sell bond C and buy bond D
Sell bond C and buy bond A
Do not change the strategy and keep the same quantity of bond C.
2) You presently own bond C. You expect yield is going to fall. Which strategy will best take advantage if your belief yield is going to fall?
Sell bond C and buy bond B
Sell bond C and buy bond D
Sell bond C and buy bond A
Do not change the strategy and keep the same quantity of bond C.
| modified Duration | ||
| Bond A | 6.5 | |
| Bond B | 8.15 | |
| Bond C | 7.35 | |
| Bond D | 4.25 |
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Finance Capital Markets Financial Management And Investment Management
Authors: Frank J. Fabozzi, Pamela Peterson Drake
1st Edition
0470407352, 978-0470407356
