You are a securities portfolio manager for a large bank. The economy has been contracting and growth has slowed markedly, but analysts believe that it will soon turn the corner and begin to expand. As a result, rates are forecast to begin rising over the next 12 months.

a)Would you prefer to shorten or lengthen the average maturity of your securities? Why?(1 mark)

b)Would wider ADI management agree with your decision? Explain(1 mark)