You hold a portfolio of US Treasuries with a roughly even split between 1 year, 5...

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Finance

You hold a portfolio of US Treasuries with a roughly even splitbetween 1 year, 5 year and 10-year bonds (these are the years tomaturity as of now). Assume that all US Treasury yields would havea similar outlook (obviously different yields, but the same trendsfor 1, 5 and 10-year bonds). Further, assume that your thoughtswere in line with most of the market, that is, bond yields wouldcontinue to increase through all of 2019.
1)     Back in June of 2019, under theassumptions above, which Treasuries would you sell first? Your 1, 5or 10-year bonds and why – I want to see your thinking on maturityand price effects related to interest rate changes.
2)   Explain why changes in bond yield (requiredreturns) and bond prices are inversely related.
3)     Discuss how price risk may differ forinvestors that intend to hold their bills/bonds to maturity vs.those that are more likely to churn or turn over their bondportfolios. This is not a big “investment class” discussion, thisis about the basics that you should understand from the coursematerial. As a hint, think about holding period return and yield tomaturity as well as the value of a bond when you sell it vs. thevalue at maturity.

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1 All the treasury yields have similar outlook ie the trend Therefore all the treasuries are similar as far as return requirement is concerned as it shows a similar trend whether upward or downward Under the assumptions one would first sell the treasury with longer maturity The simple logic being the longer the maturity period the higher is the fluctuation in interest rate risk as it serves a longer period See Answer

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You hold a portfolio of US Treasuries with a roughly even splitbetween 1 year, 5 year and 10-year bonds (these are the years tomaturity as of now). Assume that all US Treasury yields would havea similar outlook (obviously different yields, but the same trendsfor 1, 5 and 10-year bonds). Further, assume that your thoughtswere in line with most of the market, that is, bond yields wouldcontinue to increase through all of 2019.1) Back in June of 2019, under theassumptions above, which Treasuries would you sell first? Your 1, 5or 10-year bonds and why – I want to see your thinking on maturityand price effects related to interest rate changes.2) Explain why changes in bond yield (requiredreturns) and bond prices are inversely related.3) Discuss how price risk may differ forinvestors that intend to hold their bills/bonds to maturity vs.those that are more likely to churn or turn over their bondportfolios. This is not a big “investment class” discussion, thisis about the basics that you should understand from the coursematerial. As a hint, think about holding period return and yield tomaturity as well as the value of a bond when you sell it vs. thevalue at maturity.