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LOS g: Demonstrate the process of rebalancing a portfolio to re-establish a desired dollar duration.
Q1. A portfolio consists of positions in two bonds. The details of the positions are below:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$55,580 |
10.67 |
$5,930.39 |
|
Bond B: |
$30,157 |
19.21 |
$5,793.16 |
The total dollar duration is $11,723.55. After a parallel shift of the yield curve, the results change to:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$52,133 |
10.67 |
$5,562.59 |
|
Bond B: |
$26,874 |
19.21 |
$5,162.50 |
The new total dollar duration is $10,725.09. Which of the following adjustments will rebalance the portfolio to the original dollar duration?
A) Sell $2,499.28 of Bond A and buy $4,848.37 of Bond B.
B) Sell $4,848.37 of Bond A and $2,499.28 of Bond B.
C) Buy $4,848.37 of Bond A and $2,499.28 of Bond B.
Q2. A portfolio consists of positions in two bonds. The details of the positions are below:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$651,760 |
14.3 |
$93,201.68 |
|
Bond B: |
$259,255 |
18.9 |
$48,999.20 |
The total dollar duration is $142,200.88. After a parallel shift of the yield curve, the results change to:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$680,334 |
14.3 |
$97,287.76 |
|
Bond B: |
$274,382 |
18.9 |
$51,858.20 |
The new total dollar duration is $149,145.96. Which of the following adjustments will rebalance the portfolio to the original dollar duration?
A) Buy $31,703.56 of Bond A and $12,786.20 of Bond B.
B) Sell $12,786.20 of Bond A and $31,703.56 of Bond B.
C) Sell $31,703.56 of Bond A and $12,786.20 of Bond B.
Q3. A portfolio consists of positions in two bonds. The details of the positions are below:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$416,880 |
3.8 |
$15,841.43 |
|
Bond B: |
$610,752 |
4.4 |
$26,873.10 |
The total dollar duration is $42,714.53. After a parallel shift of the yield curve, the results change to:
|
Security |
Market Value |
Duration |
Dollar Duration |
|
Bond A: |
$410,166 |
3.8 |
$15,586.32 |
|
Bond B: |
$598,905 |
4.4 |
$26,351.81 |
The new total dollar duration is $41,938.13. Which of the following adjustments will rebalance the portfolio to the original dollar duration?
A) Buy $7,588.07 of Bond A and $11,079.74 of Bond B.
B) Buy $11,079.74 of Bond A and $7,588.07 of Bond B.
C) Sell $7,588.07 more of Bond A and $11,079.74 more of Bond B. | 
发表于 2009-3-5 17:56
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