Conyers Bank holds Treasury bonds with a book value of $30 million. However, the Treasury bonds currently are worth $28,387,500. The bank's portfolio manager wants to shorten asset maturities. Which of the following statements is true?

Question

Quizplus · Accepted Answer

The fact that the Treasury bonds are currently worth less than their book value implies that the bank will have to take a loss if they sell the bonds outright. Therefore, the portfolio manager would be reluctant to sell the bonds and would instead look for other ways to shorten maturities.

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