Explain why in implementing a yield spread strategy it is necessary to keep the dollar duration constant
What will be an ideal response?
When comparing positions that have the same dollar duration, it is critical to assess yield spread strategies. Failure to adjust a portfolio repositioning based on some expected change in yield spread so as to hold the dollar duration the same means that the outcome of the portfolio will be affected not only by the expected change in the yield spread but also by a change in the yield level. Thus a manager would be making a conscious yield spread bet and possibly an undesired bet on the level of interest rates.
You might also like to view...
Exhibit 9-4 During 2016, the Thomas Company began selling a new type of machine that carries a two-year assurance-type warranty against all defects. Based on past industry and company experience, estimated warranty costs should total $2,000 per machine sold. During 2016, sales and actual warranty expenditures were $4,000,000 (80 machines) and $44,000, respectively. Thomas uses the GAAP approach
of accruing warranty expense (and the related liability) in the year of the sale. ? Refer to Exhibit 9-4. What amount should Thomas report as its estimated warranty liability at December 31, 2016? A) $0 B) $44,000 C) $120,000 D) $116,000
What is the best reason for retailers to develop and maintain relationships with multiple and sometimes competing suppliers?
A. A function of retailers is to provide assortments, so they must deal with a variety of suppliers. B. A more efficient supply chain occurs when multiple vendors are involved. C. A variety of vendors assures more profit. D. By working with multiple suppliers, retailers tend to make better negotiators. E. It would be unethical for a buyer to solely work with one supplier.
When leaders practice ______, they influence others through personal values, morals, and beliefs.
A. authentic leadership B. spiritual leadership C. servant leadership D. ethical leadership
Which of the following is true due primarily to the inseparability of services?
A) Customers have to rely on reassuring physical cues that indicate quality service. B) Service businesses cannot promise the same experience with every service encounter. C) A service is produced and consumed at the same time. D) It is impossible for service businesses to exactly match supply with demand. E) It is difficult for service businesses to live up to guarantees.