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Reduce the average maturity of the portfolio

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You manage a bond portfolio and believe that market interest rates are going lower over the next several months. To profit from your belief, you should:

I. Reduce the average maturity of the portfolio by selling long-term bonds and buying short-term bonds.

II. Lengthen the average maturity of the portfolio by buying long-term bonds and selling short-term bonds.

III. Reduce the average coupon rate by selling high-coupon bonds and buying low-coupon or zero coupon bonds.

IV. Increase the average coupon rate by buying high-coupon bonds and selling low-coupon bonds.

A) I only

B) I and II only

C) II and III only

D) I and IV only

Reference no: EM132494655

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