In Classical Immunization the Effect of a Change in Interest

question 49

Multiple Choice

In classical immunization the effect of a change in interest rates is effectively neutralized because

• A) Price risk and reinvestment risk offset each other.
• B) Price risk and maturity risk offset each other.
• C) Reinvestment risk and credit risk offset each other.
• D) Reinvestment risk and maturity risk offset each other.
• E) None of the above.

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Definitions:

Marginal Productivity Theory

An economic theory that suggests the value of a good or service is determined by the productive resources involved in its production, emphasizing the contribution of each unit of labor or capital.

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Government Subsidy

A financial contribution provided by the government to individuals, businesses, or other organizations, aimed to support or stimulate economic activity.

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