A manager is holding a bond portfolio worth $10 million with a modified duration of 5 years. She would he risk of the portfolio by short-selling Treasury bonds. The modified duration of T-bonds is 6 years. He Hollars' worth of T-bonds should she sell to minimize the variance of her position? (Enter your answer millions rounded to the nearest dollar value.) Answer is complete but not entirely correct. $ Dollars' worth of T-bonds to be sold 8

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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A manager is holding a bond portfolio worth $10 million with a modified duration of 5 years. She would like to hedge
the risk of the portfolio by short-selling Treasury bonds. The modified duration of T-bonds is 6 years. How many
dollars' worth of T-bonds should she sell to minimize the variance of her position? (Enter your answer in dollars not
millions rounded to the nearest dollar value.)
Answer is complete but not entirely correct.
$
Dollars' worth of T-bonds to be sold
8 X
Transcribed Image Text:A manager is holding a bond portfolio worth $10 million with a modified duration of 5 years. She would like to hedge the risk of the portfolio by short-selling Treasury bonds. The modified duration of T-bonds is 6 years. How many dollars' worth of T-bonds should she sell to minimize the variance of her position? (Enter your answer in dollars not millions rounded to the nearest dollar value.) Answer is complete but not entirely correct. $ Dollars' worth of T-bonds to be sold 8 X
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