If you believe interest rates will rise in the future you would prefer to increase the...
If you believe interest rates will rise in the future you would prefer to increase the duration of your bond portfolio, all else equal.
True or False?
Homework Answers
False
Explanation:
Change in bond price = -ModD(basis point change in YTM)
So if interest rate increases bond price decreases, so if interest rate is expected to rise one will reduce duration of bond portfolio to minimize the downfall in bond price.
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