@vincentt @ravivooda @sophie why is the answer B?
Given: Economist believes long term interest rates should fall over the next year, but the short term interest rates should gradually increase. The client wishes to maintain the duration of its bond portfolio at 8.7.
Q: Determine the most appropriate portfolio for the client.
Portfolio 1: 100% Bond B
Portfolio 2: 50% Bond A/ 50% Bond B
Portfolio 3: 60% Bond A/ 10% Bond B/ 30% Bond C
Bond A: Annualised Bond Yield = 6.2%, Bond maturity = 5.25 yrs, Semi coupon =$3.10
Bond B: Annualised Bond Yield = 6.6%, Bond maturity = 8.5 yrs, Semi coupon =$3.30
Bond C: Annualised Bond Yield = 7.1%, Bond maturity = 19.75 yrs, Semi coupon =$3.55
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