26-77 Which of the following is an example of a negative duration asset that is valuable as a portfolio-hedging device for an FI manager when included with regular bonds whose price-yield curves show the normal inverse relationship.
A)PO strip.
B)IO strip.
C)Class B bonds
D)Class Z bonds
E)Class A bonds

Question

Quizplus · Accepted Answer

An IO strip is an example of a negative duration asset, meaning that its price moves in the opposite direction to changes in interest rates. As such, it can provide a valuable portfolio-hedging device for an FI manager, particularly when included with regular bonds whose price-yield curves show the normal inverse relationship. Options A, C, D, and E are not negative duration assets and therefore do not fit the description provided in the question.

26-77 Which of the Following Is an Example of a Negative