Effective Duration Should Be Used to Reflect the Default Risk

question 17

True/False

Effective duration should be used to reflect the default risk of a callable bond.

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Definitions:

Eastern Bloc

Refers to the group of communist states of Central and Eastern Europe during the Cold War, aligned with the Soviet Union.

Hungary

A landlocked country in Central Europe, known for its rich history, its capital Budapest, and cultural heritage, including contributions to music, literature, and cuisine.

Nikita Khrushchev

A Soviet statesman who led the Soviet Union during part of the Cold War as the First Secretary of the Communist Party from 1953 to 1964 and Chairman of the Council of Ministers (Premier) from 1958 to 1964.