In the Evaluation of Bond Portfolio Performance, the Interest Rate

question 47

Multiple Choice

In the evaluation of bond portfolio performance, the interest rate anticipation effect refers to

• A) the difference in portfolio duration and index duration.
• B) the extra return attributable to acquiring bonds that are temporarily mispriced relative to risk.
• C) short-run changes in the portfolio during a specific period.
• D) the differential return from changing duration of the portfolio during a specific period.
• E) None of these are correct.

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Definitions:

Economic Profits

The difference between total revenue and total economic costs (including both explicit and implicit costs), representing the additional income above the opportunity cost.

Monopoly

A market structure characterized by a single seller who has exclusive control over the supply of a good or service, and where the entry of new firms is hindered.

Monopolist's Profit

The excess revenue a monopolist earns over its costs, attributable to its ability to set prices above competitive levels due to lack of competition.

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.