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NEW QUESTION: 1
Anna List, a portfolio manager, wishes to construct a portfolio of bonds which will exhibit very little market value sensitivity to changes in interest rates. Which of the following strategies would be consistent with this desire?
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B. She should purchase as many zero-coupon bonds as possible.
C. She should purchase high coupon bonds with short maturities.
When all other factors are constant, bonds with short maturities and relatively high coupons will be less sensitive to changes in interest rates. Thus, zero-coupon bonds tend to be the most price-sensitive when rates change.
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