Immunization Is Not a Strictly Passive Strategy Because

question 41

Multiple Choice

Immunization is not a strictly passive strategy because

• A)it requires choosing an asset portfolio that matches an index.
• B)there is likely to be a gap between the values of assets and liabilities in most portfolios.
• C)it requires frequent rebalancing as maturities and interest rates change.
• D)durations of assets and liabilities fall at the same rate.
• E)none of the above.

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Definitions:

Potentially Efficient

A condition indicating that a system or process could achieve maximum productivity with minimum waste or expense, but hasn't yet done so.

Consumer Surplus

The gap between the amount customers are prepared to spend on a product or service and the amount they end up paying.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus what they actually receive.

P = MC

An economic principle stating that the optimal level of output occurs when the price (P) equals marginal cost (MC), guiding firms in perfect competition on production decisions.