Duration Is Considered a Good Measure of Risk for a Bond

question 12

True/False

Duration is considered a good measure of risk for a bond portfolio because it indicates the relative volatility of the bond or portfolio due to interest rate changes and also the rating of the bonds.

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Definitions:

Negative Feedback

A regulatory mechanism in which a change in a system triggers an action that reverses that change, maintaining system stability.

Internal Organs

Organs located within the main cavities of the body, such as the heart, liver, and kidneys, which perform essential functions necessary for survival.

Spinal Tap

A medical procedure where a needle is inserted into the lower part of the spinal column to collect cerebrospinal fluid for diagnostic testing.

Dorsal Cavity

One of two main body cavities in humans; contains the cranial cavity and vertebral canal.