A Bond Portfolio Manager Sees That the Yield Curve Will

question 7

Multiple Choice

A bond portfolio manager sees that the yield curve will shift upward. She swaps her long-term for short-term bonds. This is an example of a

• A) pure yield pickup swap.
• B) substitution swap.
• C) rate anticipation swap.
• D) short sale swap.

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Definitions:

Actual Results

The real outcomes or data collected after an event has occurred, often compared to forecasts or expectations to assess performance.

Internal Rate

Often referred to as the Internal Rate of Return (IRR), it is the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

Company's Rate

The rate at which a company borrows or lends money, often specific to its cost of capital or interest rates.

Required Rate

The minimum rate of return on an investment that investors demand, taking into account the investment’s risk level compared to the risk-free rate of return.