MULTIPLE CHOICE QUESTIONS

This excerpt comes from an article titled Eagle Eyes High-Coupon Callable Corporates in the January 20, 1992, issue of BondWeek, p.7:

If the bond market rallies further, Eagle Asset Management may take profits, taking $8 million of seven-to 10-year Treasuries for high-coupon single-A industries that are callable in two to four years according to Joseph Blanton, Senior V.P. He thinks a further rally is unlikely, however.

Eagle has already sold seven-to 10-year Treasuries to buy $25 million of high-coupon, single-A nonbank financial credits. It made the move to cut the duration of its $160 million fixed income portfolio from 3.7 to 2.5 years, substantially lower than the 3.3-year duration of its bogeybecause it thinks the bond rally has run its course.

Blanton said he likes single-A industrials and financials with 9 1/2-10% coupons because these are selling at wide spreads of about 100-150 basis off Treasuries.

1. According to Mr. Blanton, Eagle Asset Management has implemented
   1. A yield curve strategy
   2. A rate anticipation strategy
   3. A combination of the rate anticipation swap and yield curve strategies
   4. A combination of the yield spread and rate anticipation strategies
2. Mr. Blanton expects that
   1. The treasury yield is unlikely to rise
   2. The Single-A yield is unlikely to fall
   3. The spread between the treasury and single-A is likely to widen
   4. None of the above
3. Mr. Blanton likes single-A industrials and financials because
   1. The are likely to be called soon
   2. They are more likely to generate capital gains than the treasuries
   3. The spread is attractive even though the treasury yield may rise
   4. None of the above