A question on fixed-income PM from old curriculum book (Q13 on P130)

CFA Level III
#1

Hi all,

Can anyone please explain to me qustion 14 on page 139 of the old textbook?

It is about how the duration of a levered portfolio would change depending on the use of either an overnight repo or a 2-year term repo.

Thank you.

#2

overnight repo has a lower duration when compared to a 2 year repo.

since you are subtracting a lower duration amount for calculating levered duration - use of an overnight repo will have a bigger duration.

#3

Thank you for your answer, cpk123!