Which of the Following Is an Example of a Transfer

question 31

Multiple Choice

Which of the following is an example of a transfer payment?

• A) wages paid to military personnel
• B) benefits paid to Social Security recipients
• C) purchase of aircraft by the Department of Defense
• D) payments made to a contractor for construction of a highway

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Definitions:

Duration

A measure of the sensitivity of the price of a bond or a fixed income portfolio to changes in interest rates.

Interest-Rate Risk

The possibility of incurring losses in investments as a result of variations in interest rates, especially impacting fixed-income securities.

Coupon

The interest rate paid by a bond, usually expressed as a percentage of the bond's face value.

Cash Flow Matching

A form of immunization, matching cash flows from a bond portfolio with those of an obligation.