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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.

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.

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

False

True. Immunization is about attempting to protect bond investments from the potential risks of interest rate changes.

Immunization protects a bond's price from changing interest rates.

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True

False

True. When a bond portfolio is immunized, it is designed to be "immune" to price changes due to fluctuating interest rates.

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.

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