Asked by Syed ali Akber kazmi on Jul 06, 2024
Verified
Duration is important in bond portfolio management becauseI) it can be used in immunization strategies.II) it provides a gauge of the effective average maturity of the portfolio.III) it is related to the interest rate sensitivity of the portfolio.IV) it is a good predictor of interest-rate changes.
A) I and II
B) I and III
C) III and IV
D) I, II, and III
E) I, II, III, and IV
Immunization Strategies
Financial strategies used to shield a bond portfolio from the effects of interest rate fluctuations by balancing the duration of assets and liabilities.
Interest Rate Sensitivity
The degree to which the value of an investment, particularly fixed-income securities, changes in response to variations in interest rates.
Duration
A measure of the sensitivity of the price of a bond or a bond portfolio to changes in interest rates, usually expressed in years.
- Acquire knowledge on the core concepts and difficulties involved in immunization strategies within bond portfolio management.
- Discover the factors determining bond duration and their impact on the volatility of bond prices.
Verified Answer
Learning Objectives
- Acquire knowledge on the core concepts and difficulties involved in immunization strategies within bond portfolio management.
- Discover the factors determining bond duration and their impact on the volatility of bond prices.
Related questions
Which of the Following Two Bonds Is More Price Sensitive ...
Some of the Problems with Immunization Are ...
Holding Other Factors Constant, Which One of the Following Bonds ...
Holding Other Factors Constant, the Interest-Rate Risk of a Coupon ...
Holding Other Factors Constant, the Interest-Rate Risk of a Coupon ...