Is this erroneous? The answer to 15 is B, however I would think it’s A given that the key rate dur of the short-term bond is negative, it should benefit from a bear steepening versus the index, no???
No.
It will benefit by a tiny bit because of the 2-year KRD, but it will likely lose more from the 5-year KRD and a lot more from the 10-year KRD.
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