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Abstract

This article discusses the application of a quadratic programming model to the bond and note participation decision of a Cooperative Farm Credit Bank. The model generates an efficient frontier of bond and note portfolios from which a bank can choose. The composition of these portfolios depends upon the expected cost and variance-covariance of cost for the bond and note activities, debt needs, and the debt policy constraints of a bank. The results indicate that the interest rate risk of various bond and note issues should be considered when making debt participation decisions.

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