Conyers Bank holds Treasury bonds with a book value of $30 million. However, the Treasury bonds currently are worth $28,387,500. If the portfolio manager wants to shorten the bank's asset maturity, what type of risk is she concerned about?

Question

Quizplus · Accepted Answer

The risk the portfolio manager is concerned about is the risk of rising interest rates. Shortening the asset maturity will decrease the duration of the portfolio and potentially reduce the impact of rising interest rates on the value of the Treasury bonds.

Conyers Bank Holds Treasury Bonds with a Book Value of $30