Question $15$

You have your money divided between the following government bonds in the

following proportions.

$20\%$ in $5$ Year bonds at $6\%$ yield

$40\%$ in $10$ year bonds at $6\%$ yield

$40\%$ in $15$ year bonds at $6\%$ yield

You expect the yield curve to change such that will increase to $7\%$ at $5$ year bonds,

remain at $6\%$ for $10$ year bonds and fall to $5\%$ for $15$ year bonds. Which of the

following represents a sensible reallocation of you portfolio based on your

expectations?

A$)60\%$ in $5$ year bonds, $20\%$ in $10$ year bonds and $20\%$ in $15$ year bonds.

B$)30\%$ in $5$ year bonds, $30\%$ in $10$ year bonds and $40\%$ in $15$ year bonds.

C$)10\%$ in $5$ year bonds, $35\%$ in $10$ year bonds and $55\%$ in $15$ year bonds

D$)$ None of the above.