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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.

A bond portfolio is immunized when ________.

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Its time horizon is longer than its duration

Its duration is longer than its time horizon

Its duration is equal to its time horizon

Its duration is equal to its time horizon. A bond portfolio is immunized when its duration is equal to its time horizon.

Combination matching can lower the reinvestment risk of a portfolio.

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True

False

True. Combination matching can lower the reinvestment risk of a portfolio.

Which is not true about bond duration?

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It can be used to measure a bond's price volatility.

It is made up of weighted cash-flow averages over a bond's entire life.

The shorter a bond's duration, the greater its price volatility.

It can be used to determine how interest rates will affect a bond's value.

The shorter a bond's duration, the greater its price volatility. In reality, the longer a bond's duration, the greater its price volatility.

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.

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