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Bonds 104: Immunization

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1.
Maintaining a fixed rate of return on a bond for a specific period of time is known as _______.
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Immunization. Immunization is a way of aiming to help protect returns.
2.
The goal of immunization is to offset the effects of interest rates on a bond's price and reinvestment rate.
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True. Immunization is about attempting to protect bond investments from the potential risks of interest rate changes.
3.
Combination matching can lower the reinvestment risk of a portfolio.
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True. Combination matching can lower the reinvestment risk of a portfolio.
4.
A bond portfolio is immunized when ________.
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Its duration is equal to its time horizon. A bond portfolio is immunized when its duration is equal to its time horizon.
5.
Combination matching aims to match a bond portfolio duration to its time horizon, cash flow, and goals.
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True. In combination matching, the bond portfolio not only aims to match its duration to its time horizon, but also its cash flow and goals.