The Major Function of a Financial Plan Is To

question 89

Multiple Choice

The major function of a financial plan is to:

• A)reduce taxes.
• B)increase savings.
• C)achieve financial goals.
• D)improve your credit rating.
• E)obtain adequate insurance protection.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date, expressed as an annual rate.

Duration

A measure of the sensitivity of a bond's or fixed income portfolio's price to changes in interest rates, often used to manage interest rate risk.

Modified Duration

A measure of the sensitivity of a bond's price to changes in interest rates, specifically reflecting how much the duration changes for a 1% change in yield.

Macaulay Duration

A measure of the weighted average time until a bond or fixed income portfolio's cash flows are received, used to gauge interest rate sensitivity.