You are a portfolio manager who has presented a report to a client. The report indicates the duration of each security in the portfolio. One of the securities has a maturity of 15 years but a duration of 25. The client believes that there is an error in the report because he believes that the duration cannot be greater than the security’s maturity. What would be your response to this client?
Answer to relevant QuestionsAnswer the below questions. (a) Suppose that the spread duration for a fixed-rate bond is 2.5. What is the approximate change in the bond’s price if the spread changes by 50 basis points? (b) What is the spread duration of ...For a corporate bond that has a low credit rating, why might an analytical duration be limited as a measure of interest-rate risk? State why you would agree or disagree with the following statement: As the duration of a zero-coupon bond is equal to its maturity, the price responsiveness of a zero-coupon bond to yield changes is the same regardless of ...You are a financial consultant. At various times you have heard comments on interest rates from one of your clients. How would you respond to each comment? (a) Respond to: “The yield curve is upward-sloping today. This ...Explain the role that forward rates play in making investment decisions.
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