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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.

Combination matching aims to match a bond portfolio duration to its time horizon, cash flow, and goals.

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True

False

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.

When interest rates rise, ________.

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A bond's price increases

A bond's reinvestment rate decreases

Both choices are correct

Neither choice is correct

Neither choice is correct. When interest rates rise, a bond's price decreases and its reinvestment rate increases.

Contingent immunization strives to match a portfolio's cash flow to its liabilities.

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True

False

False. This matching is called combination matching.

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