The Principle of Duration Matching Is

question 32

Multiple Choice

The principle of duration matching is

• A) used only in bond portfolio management.
• B) a useful concept for investments with target dates.
• C) matching one's assets to one's objectives.
• D) a useful concept for investments with target dates and means matching one's assets to one's objectives.
• E) None of the options are correct.

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Definitions:

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity, which is a significant factor in determining a company's financial health and risk level.

Cost Structure

The composition of fixed and variable costs that a company incurs in the process of producing goods or services.

Operating Leverage

A gauge of the relationship between sales growth and the growth of operational earnings, showing the mix of fixed and variable costs within a business.

Financial Leverage

The use of borrowed funds to finance investments, aiming to increase the potential return to equity holders.