Duration Is Defined as the Weighted Average Time to Maturity

question 43

Essay

Duration is defined as the weighted average time to maturity of a financial instrument. Explain how this knowledge can help protect against interest rate risk.

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Definitions:

Incumbent Management

The current team or individual responsible for managing and making key decisions in an organization.

Diversification

An investment strategy that reduces risk by allocating investments among various financial instruments, industries, or other categories.

Corporate Governance

The system of rules, practices, and processes by which a firm is directed and controlled.

Merger

The combination of two or more companies into one, where one corporation is absorbed into another or they form a new entity.