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A rate anticipation swap is an active strategy undertaken to _____________.Question 17Select one:a.shift between corporate and government bonds when the yield spread is out of line with historical valuesb.increase return by shifting into higher yield bondsc.shift portfolio duration in response to an anticipated change in interest ratesd.profit from apparent mispricing between two bonds

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A rate anticipation swap is an active strategy undertaken to _____________.Question 17Select one:a.shift between corporate and government bonds when the yield spread is out of line with historical valuesb.increase return by shifting into higher yield bondsc.shift portfolio duration in response to an anticipated change in interest ratesd.profit from apparent mispricing between two bonds

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Solution

A rate anticipation swap is an active strategy undertaken to c. shift portfolio duration in response to an anticipated change in interest rates. This strategy involves swapping one type of bond for another with a different duration in anticipation of a change in interest rates. The goal is to either increase the portfolio's duration if rates are expected to fall or decrease the portfolio's duration if rates are expected to rise.

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