Below is a Key Rate Duration (KRD) analysis of a fictitious portfolio vs a benchmark index. In a scenario where the 5-year yield decreased while the 10-year yield increased today compared to yesterday, which would outperform the other (i.e. higher relative price gain)? The portfolio or the index? Assume the 2y and 20y rates remained the same day over day. Term 2y 5y 10y 20y Total Portfolio 1.8 2.4 4.5 8.1 16.8 Index 1.1 0.9 6.2 8.6 16.8 O The portfolio would outperform the index O The index would outperform the portfolio Each would perform the same since the overall portfolio duration is the same

Below is a Key Rate Duration (KRD) analysis of a fictitious portfolio vs a benchmark index. In a scenario where the 5-year yield decreased while the 10-year yield increased today compared to yesterday, which would outperform the other (i.e. higher relative price gain)? The portfolio or the index? Assume the 2y and 20y rates remained the same day over day. Term 2y 5y 10y 20y Total Portfolio 1.8 2.4 4.5 8.1 16.8 Index 1.1 0.9 6.2 8.6 16.8 O The portfolio would outperform the index O The index would outperform the portfolio Each would perform the same since the overall portfolio duration is the same

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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