What action should the portfolio manager take to achieve the target duration?
What will be an ideal response?
The true duration is then less than the target duration of 6.0 . Hence, the action that the portfolio manager must take is to increase the duration of the non-high-yield bonds. We show this to be7.19 by solving algebraically for this equation:(1 – 0.20)Y + 0.20(1.35) = 6.0 . Doing this gives Y = 7.19 .
This indicates a significant difference in the action that must be taken by the portfolio manager resulting from this change in the target duration and the allocation to 20% high-yield corporate bonds, and it depends on the proper determination of the true duration for the high-yield corporate bonds.
You might also like to view...
Jasmine wants to become head of her department. Although she will be greatly compensated if she achieves this aim and will gain control over many subordinates, the main reason she is pursuing this position is that she thinks she can do the job better
than anyone else and wants people to know this. According to the McClelland's theory of needs, which of the following needs primarily drives Jasmine in this case? A) the need for stability B) the need for achievement C) the need for growth D) the need for affiliation E) the need for power
Discuss SQL data types
What will be an ideal response?