Homework 17 - a. 1.5 b. 2.0 c. 2.6 d. 3.5 2) What is the...

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Chapter 17 – Measuring a Portfolio’s Risk Profile Use the following data to answer Questions 1 through 4 Brian Reid is the portfolio manager of AA Corporate Bond Investors, Inc. His current $10 million bond position is as follows: Bond Market value weight (%) Effective duration 1 50 2.00 2 40 3.00 3 10 4.00 The investment policy allows the portfolio manager to leverage the portfolio by 20 percent, or $2 million, using a 1-month reverse repo transaction 1) What is the duration of the bond portfolio?
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Unformatted text preview: a. 1.5 b. 2.0 c. 2.6 d. 3.5 2) What is the contribution of Bond #2 to the duration of the bond portfolio? a. 1.0 b. 1.2 c. 1.4 d. 1.6 3) Reid’s bond portfolio is potentially exposed to: a. Spread risk b. Default risk c. Interest rate risk d. All of the above 4) Which of the following methods uses binomial interest rate trees to determine spread? a. Nominal spread b. Zero-validity spread c. Option-adjusted spread d. Treasury premium spread...
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This note was uploaded on 04/04/2012 for the course ECON 313 taught by Professor India during the Spring '12 term at University of San Francisco.

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Homework 17 - a. 1.5 b. 2.0 c. 2.6 d. 3.5 2) What is the...

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