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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.
Contingent immunization strives to match a portfolio's cash flow to its liabilities.
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False. This matching is called combination matching.
3.
Immunization protects a bond's price from changing interest rates.
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True. When a bond portfolio is immunized, it is designed to be "immune" to price changes due to fluctuating interest rates.
4.
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.
5.
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.