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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.

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.

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.

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.

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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