“Bond Risk Management![]()
- Given the Federal Reserve Board’s current and forward-looking position on interest rates, predict the level of risk associated with investing in bonds and recommend a portfolio percentage for investment in bonds for a financial institution. Provide support for your recommendation.
- Assess how an increase in the interest rate would change your recommendation provided above. Indicate the basis for your rationale.
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Bond Risk Management
The Federal Reserve Board has in the recent past been taking a great position on interest rates since the 2007/2008 financial crisis. Interest rates are critical to the growth of the United States economy and thereby the current position is one that will enable the growth of the country’s economy. The current and forward-looking position is one that is based on a wait-and-see stance where it assesses the impacts of interest rates on the growth of the economy and adjusts the interest rates accordingly.
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