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100
Bonds 104:
Immunization
Test your knowledge
Choose wisely. There is only one correct answer to each question.
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1.
Maintaining a fixed rate of return on a bond for a specific period of time is known as _______.
Choose wisely. There is only one correct answer.
Duration
Immunization
Time horizon
Yield
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.
Choose wisely. There is only one correct answer.
True
False
False. This matching is called combination matching.
3.
Immunization protects a bond's price from changing interest rates.
Choose wisely. There is only one correct answer.
True
False
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.
Choose wisely. There is only one correct answer.
True
False
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.
Choose wisely. There is only one correct answer.
True
False
True. Combination matching can lower the reinvestment risk of a portfolio.
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