A portfolio consists of positions in two bonds. The details of the positions are below:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$651,760 |
14.3 |
$93,201.68 |
|
Bond B: |
$259,255 |
18.9 |
$48,999.20 |
The total dollar duration is $142,200.88. After a parallel shift of the yield curve, the results change to:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$680,334 |
14.3 |
$97,287.76 |
|
Bond B: |
$274,382 |
18.9 |
$51,858.20 |
The new total dollar duration is $149,145.96. Which of the following adjustments will rebalance the portfolio to the original dollar duration?
A. Buy $31,703.56 of Bond A and $12,786.20 of Bond B.
B. Sell $31,703.56 of Bond A and $12,786.20 of Bond B.
C. Sell $12,786.20 of Bond A and $31,703.56 of Bond B.
|
