A Portfolio Is Exposed to Interest Rate Increases Causing a Loss

question 35

Multiple Choice

A portfolio is exposed to interest rate increases causing a loss of capital when:

• A) the average duration of assets is less than the average duration of liabilities.
• B) both ZCBs and annuities are held.
• C) the average duration of assets is greater than the average duration of liabilities.
• D) neither ZCBs nor annuities are held.

---

Definitions:

Motors

Machines that convert electrical energy into mechanical energy, typically used for powering devices, vehicles, or machinery.

Buyer Power

The influence that consumers have over a business or market, often determining pricing, availability, and features of products or services.

Supplier Power

The influence that suppliers have over the price and availability of their products or services, which can impact the market dynamics.

Small Town

A small town is a community with a small population and relatively few buildings, often characterized by a close-knit society and slower pace of life compared to urban areas.