A fund manager uses a Barbell strategy while investing in bonds. He expects interest rate volatility. How will he allocate among short, medium, and long-term bonds?

Practice question from NISM XXI A for PMS - Mock Test 6 — bank. The correct answer is highlighted below with a full explanation.

Options

45%-10%-45% in Short, Medium, and Long term duration bonds respectively

Correct answer
B

25%-50%-25% in Short, Medium, and Long term duration bonds respectively
C

35%-35%-30% in Short, Medium, and Long term duration bonds respectively
D

30%-20%-50% in Short, Medium, and Long term duration bonds respectively

Why this is the answer

The barbell strategy involves allocating primarily to short-term and long-term bonds with minimal medium-term bonds, to hedge against interest rate swings.

Test yourself for real

Take a full NISM Series XXI-A mock test.

Same duration, same weighting, same difficulty distribution as the real exam — with explanations on every question.

NISM XXI A for PMS - Mock Test 6