The Curvature of the Price Yield Curve for a Given

question 40

Multiple Choice

The curvature of the price yield curve for a given bond is referred to as the bond's

• A) modified duration.
• B) immunization.
• C) sensitivity.
• D) convexity.
• E) tangency.

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Definitions:

Certainty Equivalent NPV

A method of valuing risky projects or investments by adjusting the expected cash flows to reflect the investor's risk aversion, providing a 'risk-free' net present value.

Cost of Capital

The minimum return on investment a business necessitates to uphold its market value and entice financial inflow.

Certainty Equivalent NPV

A method used to adjust the net present value (NPV) of an investment to account for risk, equating it to a certain but lower cash flow.

Cost of Capital

The investment return rate a corporation requires to sustain its market valuation and pull in investment.