An example of simultaneous buying of one bond (for example,with fixed rate coupon payments)and selling of another (for example,with variable rate interest payments)occurs when one participates in a:
A)bond ladder strategy.
B)bond swap.
C)interest rate futures transaction.
D)bond portfolio immunization strategy.

Question

Quizplus · Accepted Answer

Bond swap involves simultaneous buying and selling of bonds. It is a strategy where an investor sells a bond with lower interest rate payments and buys a bond with higher interest rate payments, in order to benefit from the higher interest rate. This is done without changing the overall risk profile of the portfolio. Bond ladder strategy involves buying bonds with different maturity dates, to create a steady stream of income. Interest rate futures transaction involves buying or selling futures contracts based on the expected future interest rates. Bond portfolio immunization strategy is a risk management technique used to protect portfolios against interest rate changes. It involves creating a portfolio of bonds that matches the duration of the investor's liabilities.

An Example of Simultaneous Buying of One Bond (For Example,with