Explanation:
Answer: B
Barbell portfolios typically have higher convexity than bullet portfolios with the same duration. This is because:
Higher convexity means the barbell portfolio will benefit more from large interest rate movements in either direction.
No comments yet.
Assume two bond portfolios with identical yields of 5.0%. One is a bullet portfolio with duration equal to 9; the other is a barbell portfolio with duration also equal to 9. How do their convexities compare?
A
Barbell convexity is less than (<) bullet's convexity
B
Barbell convexity is greater than (>) bullet's convexity
C
Convexities are similar
D
Need more information