When Yield Swings Are Relatively Small, a Bond's Duration Is

question 43

True/False

When yield swings are relatively small, a bond's duration is a viable predictor of its price volatility.

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Definitions:

Replacement Chain Method

A capital budgeting decision tool that compares different projects by analyzing them over a common time period, particularly useful for comparing investments of different durations.

Equivalent Annual Annuity

A financial term that represents the annual cash flow from an investment over its lifespan, making it easier to compare different investments.

Capital Rationing

Capital rationing is a strategy where companies limit or restrict their capital investments due to budgetary constraints.

Total NPV

The sum of the net present values of a series of cash flows, which can indicate the overall net benefit of a series of potential investments or projects.