Which of the Following Statements Are Incorrect

question 15

Multiple Choice

Which of the following statements are incorrect?

• A) Convexity is a desirable effect to a portfolio manager because it is easy to measure and price.
• B) All fixed-income assets exhibit convexity in their price-yield relationships.
• C) The greater is convexity, the more insurance a portfolio manager has against interest rate increases and the greater potential gain from rate decreases.
• D) The fact that the capital gain effect for rate decreases is greater than the capital loss effect for rate increases is caused by convexity in the yield-price relationship.

---

Definitions:

Inflation Rate

A percentage-based uplift in the cost of goods and services within an economy over a designated timeframe.

Zero-inflation

A situation where the price level of goods and services remains constant over time, indicating an absence of inflation in the economy.

Phillips Curve

An economic concept that describes an inverse relationship between rates of unemployment and corresponding rates of inflation, suggesting that higher inflation is associated with lower unemployment and vice versa.

1970s

A decade marked by significant events including economic turmoil, the oil crisis, social movements, and the Cold War's continuing tension.