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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.
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.
2.
Which is not true about bond duration?
Choose wisely. There is only one correct answer.
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.
3.
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.
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.
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.
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DONE