Under a Laddering Approach, Investors Mitigate the Effects of an Interest

question 62

Multiple Choice

Under a laddering approach, investors mitigate the effects of an interest rate increase by:

• A) purchasing bonds in two maturity groups, long or short.
• B) purchasing bonds with the same maturity date but with a variety of coupon rates.
• C) purchasing bonds with a variety of maturity dates.
• D) purchasing bonds with a variety of YTMs.

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Definitions:

Residual Value

The projected worth of a tangible asset upon reaching the conclusion of its operational lifespan.

Depreciation Expense

An accounting method used to allocate the cost of a tangible or physical asset over its useful life.

Straight-Line Method

A method of calculating depreciation of an asset evenly across its useful life, where the same amount is expensed each year.

Accumulated Depreciation

The cumulative total of depreciation charges applied to a fixed asset from the time of its acquisition.