With a Matched Funding Technique, Portfolio Managers Try to Match

question 105

True/False

With a matched funding technique, portfolio managers try to match specific liability obligations due at specific times to a portfolio of bonds that minimize the portfolio's interest rate risk.

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Definitions:

Principal Value

The original sum of money invested or loaned, prior to any earnings, interest, or loss.

Term Deposit

A banking term for a fixed-term investment where money is deposited at an agreed interest rate and cannot be withdrawn until the term has expired without incurring a penalty.

Maturity Value

The total amount that will be paid to an investor at the end of a bond's term or upon maturity of an investment.

Interest Components

The different parts that make up the total interest calculation, including the principal amount, interest rate, and time period.