What Are the Two Components of Interest-Rate Risk? How Do

question 32

Essay

What are the two components of interest-rate risk? How do they work to immunize a portfolio?

---

Definitions:

Operating Results

The outcome of a company's core business activities, including revenue generation and expenses, over a specific period.

Fixed Cost

Costs that do not vary with the level of production or sales, remaining constant within a specific range of activity.

Contribution Margin

The difference between a company's sales revenue and its variable costs.

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific business segment or operation.