You are considering two Treasury bond portfolios. One is a barbell comprised of two bonds with maturities of 5 years and 20 years, the other is a bullet comprised of a single bond with a maturity of 10 years. The two portfolios are constructed to have the same modified durations. You predict a large upward parallel shift of the yield curve. Given this prediction, what should you do?

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In this case you would want to go with the barbell portfolio since it will be less sensitive to chan... View the full answer