Considering two treasury bond portfolios

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Reference no: EM132055697

1. You are considering two Treasury bond portfolios. One is a barbell comprised of two bonds with maturities of 3 years and 16 years, the other is a bullet comprised of a single bond with a maturity of 9 years. The two portfolios are constructed to have the same modified durations, however the barbell portfolio has significantly higher convexity. If you predict a large upward parallel shift of the yield curve, what should you do?

a. Invest 100% of funds in the bullet

b. Invest 100% in the barbell

c. Invest equal proportions in the bullet and the barbell

2. If you invest 25%of your money in the stock of Citi bank (C) with an expected rate of return of -32% and 75% of your money in the stock of Apple (AAPL) with an expected rate of return of 120%, what will be the expected rate of return on this portfolio?

a. 82%

b. 120%

c. 76%

d. 92%

e. 32%

Reference no: EM132055697

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