A Substitution Swap Is an Exchange of Bonds Undertaken to

question 43

Multiple Choice

A substitution swap is an exchange of bonds undertaken to

• A) change the credit risk of a portfolio.
• B) extend the duration of a portfolio.
• C) reduce the duration of a portfolio.
• D) profit from apparent mispricing between two bonds.
• E) adjust for differences in the yield spread.

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Definitions:

Net Loss

The amount by which expenses exceed revenues in a given period, resulting in a decrease in equity.

Debits And Credits

Accounting entries that are used to record transactions, where debits increase asset or expense accounts and decrease liability, equity, and revenue accounts, while credits do the opposite.

Income Statement

A financial statement that reports a company's financial performance over a specific period, detailing revenues, expenses, and net income.

Statement Of Owner's Equity

A financial document showing the changes in the equity of a company during a specific period, through investments, withdrawals, and net income or loss.