Which of the Following Statements Is FALSE

question 27

Multiple Choice

Which of the following statements is FALSE?

• A)As interest rates change,the market values of the securities and cash flows in the portfolio change as well,which in turn alters the weights used when computing the duration as the value-weighted average maturity.
• B)The duration of a portfolio of investments is the simple average of the durations of each investment in the portfolio.
• C)Adjusting a portfolio to make its duration neutral is sometimes referred to as immunizing the portfolio,a term that indicates it is being protected against interest rate changes.
• D)When the durations of a firm's assets and liabilities are significantly different,the firm has a duration mismatch.

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Definitions:

Seasonal Unemployment

Unemployment resulting from the seasonal pattern of work in certain industries, with workers regularly laid off during the slow season and rehired during the busy season.

Unemployment Rate

The unemployment rate is the percentage of the labor force that is jobless and actively seeking employment.

Natural Rate

The natural rate of unemployment is the level of unemployment consistent with a stable rate of inflation.

Inflationary Wage

Wage increases that match or exceed the rate of inflation, aimed at maintaining or increasing purchasing power over time.