2. At the present time, you expect a decline in interest rates and must choose between two portfolios of bonds with the following characteristics: Portfolio B Portfolio A 10.0 yrs 10.5 yrs Average maturity Average YTM Modified duration 10% 7% 4.9 yrs 5.7 yrs 40.30 125.18 Convexity Call features Deferred call features that range from 1 to 3 years Noncallable Select one of the portfolios and discuss three factors that would justify your selection.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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2. At the present time, you expect a decline in interest rates and must choose between two
portfolios of bonds with the following characteristics:
Portfolio B
Portfolio A
10.0 yrs
10.5 yrs
Average maturity
Average YTM
Modified duration
10%
7%
4.9 yrs
5.7 yrs
40.30
125.18
Convexity
Call features
Deferred call features that range
from 1 to 3 years
Noncallable
Select one of the portfolios and discuss three factors that would justify your selection.
Transcribed Image Text:2. At the present time, you expect a decline in interest rates and must choose between two portfolios of bonds with the following characteristics: Portfolio B Portfolio A 10.0 yrs 10.5 yrs Average maturity Average YTM Modified duration 10% 7% 4.9 yrs 5.7 yrs 40.30 125.18 Convexity Call features Deferred call features that range from 1 to 3 years Noncallable Select one of the portfolios and discuss three factors that would justify your selection.
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