A portfolio consists of positions in two bonds. The details of the positions are below:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$416,880 |
3.8 |
$15,841.43 |
|
Bond B: |
$610,752 |
4.4 |
$26,873.10 |
The total dollar duration is $42,714.53. After a parallel shift of the yield curve, the results change to:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$410,166 |
3.8 |
$15,586.32 |
|
Bond B: |
$598,905 |
4.4 |
$26,351.81 |
The new total dollar duration is $41,938.13. Which of the following adjustments will rebalance the portfolio to the original dollar duration?
A. Buy $11,079.74 of Bond A and $7,588.07 of Bond B.
B. Sell $7,588.07 more of Bond A and $11,079.74 more of Bond B.
C. Buy $7,588.07 of Bond A and $11,079.74 of Bond B.
|
