Contingent Immunization

question 4

Multiple Choice

Contingent immunization

• A) is a mixed-active passive bond portfolio management strategy.
• B) is a strategy whereby the portfolio may or may not be immunized.
• C) is a strategy whereby if and when some trigger point value of the portfolio is reached,the portfolio is immunized to insure an minimum required return.
• D) a and b.
• E) a,b,and c.

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Definitions:

Variable Rate

An interest rate that can change, in contrast to a fixed interest rate, and is often associated with loans or savings accounts.

Prime Rate

The interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark in lending rates.

Forward Contract

A bespoke contract between two parties for the future exchange of an asset, set at a price determined today, to occur at a specific later date.

Spot Market Price

The current market price at which a particular asset, such as a commodity, currency, or security, can be bought or sold for immediate delivery.