Maturity Risk Exists Because the Prices of Longer-Term Bonds Fluctuate

question 132

Multiple Choice

Maturity risk exists because the prices of longer-term bonds fluctuate more in response to:

• A)government policy changes.
• B)company policy changes.
• C)industry changes.
• D)interest rate changes.

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Definitions:

Nonsystematic Variance

The variability in a security's or a portfolio's returns that is not related to overall market movements.

Market Index

A method or metric to measure the performance of a group of stocks, representing a particular market or sector, to give investors a snapshot of its overall health.

Active Portfolio

An investment strategy where the portfolio manager makes specific investments with the goal of outperforming an investment benchmark index.

Nonsystematic Variance

The portion of a security's variance that is unique to the specific security and can be mitigated through diversification.