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A manager is holding a $1.8 million bond portfolio with a modified duration of nine years....

A manager is holding a $1.8 million bond portfolio with a modified duration of nine years. She would like to hedge the risk of the portfolio by short-selling Treasury bonds. The modified duration of T-bonds is 10 years. How many dollars' worth of T-bonds should she sell to minimize the risk of her position? (Enter your answer in dollars not in millions.)

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Expert Solution

Given bond portfolio duration is : 9 [email protected] million dollars

T- bonds modified duration is :10 years

But required t- bonds to sell for minimize risk:

= $ 18,00,000*9/10

= $ 16,20,000.

jeff jeffy answered 2 years ago
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