Question

40.You are a bond trader and a compliance officer calls you and tells you that are taking too much risk. What can you do to reduce the risk of your portfolio?

Select one:a. Sell short maturity bonds and buy longer maturity bondsb. Sell high coupon bonds and buy low coupon bonds.c. Buy short maturity bonds and sell long maturity bonds.d. Sell short maturity bonds and buy stocks with a high beta.e. None of the above.

Answer 1

" B.  Sell high coupon bonds and buy low coupon bonds.

As you wish to decrease the risk, and lower rate of return means lower risk, other things being constant, will reduce your total risk.

All other options may or may not decrease the risk.

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