In the Context of a Bond Portfolio, Price Risk and Reinvestment

question 18

Multiple Choice

In the context of a bond portfolio, price risk and reinvestment rate risk exactly cancel out at a time horizon equal to the ________.

• A) average bond maturity in the portfolio
• B) duration of the portfolio
• C) difference between the shortest duration and longest duration of the individual bonds in the portfolio
• D) average of the shortest duration and longest duration of the bonds in the portfolio

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Definitions:

Feedforward Control

A management strategy that focuses on regulating inputs (rather than outputs) to manage future performance and prevent problems.

Concurrent Control

A management technique wherein monitoring and adjustments occur simultaneously with the implementation of activities to ensure objectives are met.

Feedback Control

A system or process that adjusts its operation based on differences between the actual outcome and the desired outcome, often used in management and engineering to maintain desired performance levels.

Concurrent Control

involves the monitoring and adjusting of activities in real-time during the process of their implementation to ensure that objectives are met.