contestada

Which bond portfolio where all investment is made up front would be LEAST negatively affected by a sharp rise in interest rates?A. LadderB. BulletC. BarbellD. Balloon

Respuesta :

Answer:

C. Barbell

Explanation:

The barbell portfolio has only 2 maturities

  • One is a very short term and a very long term  

The bonds with longer term give a higher yield but they have a higher interest rate risk.

But in the very short term bond since the maturity time is less thus the bonds will mature sooner and the proceeds can be reinvested at higher rates.

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