You Have an Investment Horizon of 6 Years

question 5

Multiple Choice

You have an investment horizon of 6 years. You choose to hold a bond with a duration of 6 years and continue to match your investment horizon and duration throughout your holding period. Your realized rate of return will be the same as the promised yield on the bond if:
I. Interest rates increase.
II. Interest rates stay the same.
III. Interest rates fall.

• A) I only
• B) II only
• C) I and II only
• D) I, II, and III

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Definitions:

State-dependent Memory

The occurrence where data acquired while in a specific emotional condition (for example, joy or sorrow) is more readily remembered when one is again in that emotional state.

Tranquilizing Drug

Medications used to reduce tension or anxiety, functioning typically by depressing the central nervous system.

Test Anxiety

The extreme stress, anxiety, and discomfort some individuals feel before or during examinations, negatively affecting performance.

Method of Loci

A mnemonic strategy of associating information to be remembered with specific physical locations, enhancing the recall of the information by visualizing moving through those places.