Question
Suppose that you are a savvy financial advisor. A client shows up and wants to buy a bond with duration equal to 4. Unfortunately, you
Suppose that you are a savvy financial advisor. A client shows up and wants to buy a bond with duration equal to 4. Unfortunately, you dont know such a bond. However, you have 2 other bonds ready to be sold Bond A has duration 1 and Bond B has duration 5. What should you do?
A) convince the client to buy Bond A this is the safest bond.
B) Convince the client to buy Bond B there is not much difference between duration of 4 and duration of 5.
C) offer the client a portfolio of Bonds A and B with weights 0.5 and 0.5.
D) offer the client a portfolio of Bond A and Bond B with weights 0.25 and 0.75.
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