Below is a Key Rate Duration (KRD) analysis of a fictitious portfolio vs a benchmark index. In a scenario where the 5-year yield decreased while the 10-year yield increased today compared to yesterday, which would outperform the other (i.e. higher relative price gain)? The portfolio or the index? Assume the 2y and 20y rates remained the same day over day. Term 2y 5y 10y 20y Total Portfolio 1.8 2.4 4.5 8.1 16.8 Index 1.1 0.9 6.2 8.6 16.8 O The portfolio would outperform the index O The index would outperform the portfolio Each would perform the same since the overall portfolio duration is the same
Below is a Key Rate Duration (KRD) analysis of a fictitious portfolio vs a benchmark index. In a scenario where the 5-year yield decreased while the 10-year yield increased today compared to yesterday, which would outperform the other (i.e. higher relative price gain)? The portfolio or the index? Assume the 2y and 20y rates remained the same day over day. Term 2y 5y 10y 20y Total Portfolio 1.8 2.4 4.5 8.1 16.8 Index 1.1 0.9 6.2 8.6 16.8 O The portfolio would outperform the index O The index would outperform the portfolio Each would perform the same since the overall portfolio duration is the same
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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Transcribed Image Text:Below is a Key Rate Duration (KRD) analysis of a fictitious portfolio vs a benchmark index. In a scenario where the 5-year yield decreased
while the 10-year yield increased today compared to yesterday, which would outperform the other (i.e. higher relative price gain)? The
portfolio or the index?
Assume the 2y and 20y rates remained the same day over day.
Term
2y
5y
10y
20y
Total
Portfolio
1.8
2.4
4.5
8.1
16.8
Index
1.1
0.9
6.2
8.6
16.8
The portfolio would outperform the index
O The index would outperform the portfolio
Each would perform the same since the overall portfolio duration is the same
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