A(n) ____ Buys and Holds an Unmanaged Fixed Portfolio of Fixed-Maturity

question 106

Multiple Choice

A(n) ____ buys and holds an unmanaged fixed portfolio of fixed-maturity securities such as municipal bonds.

• A)exchange-traded fund
• B)real estate investment trust
• C)unit investment trust
• D)sector fund

---

Definitions:

IRR

Internal Rate of Return; a metric used in capital budgeting to estimate the profitability of potential investments, representing the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.

NPV

Net Present Value, a method used in capital budgeting to assess the profitability of an investment or project by calculating the present value of expected future cash flows minus initial costs.

Replacement Chain Approach

The Replacement Chain Approach is a method used in capital budgeting to compare projects of unequal lifespans by replicating them until they reach a common end point, facilitating fair comparison.

Cost of Capital

The rate of return that a business needs to generate in order to cover the cost of generating new capital, which can include debt and equity.